Why Demo Accounts Are Not Just for Trading Beginners

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by Julia Sakovich · 3 min read
Why Demo Accounts Are Not Just for Trading Beginners
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Here are some reasons why even experienced traders may find demo accounts on trading platforms useful for them.

Demo accounts on trading platforms offer newcomers the chance to get started gently. A report from 2018 suggested that 4.3 million people started trading in 2018, so there is a clear need for software like this.

Yet, demo accounts can also be extremely useful for experienced traders, although this is generally for different reasons to newcomers. Here are some reasons why a more knowledgeable user may decide to use dummy money like this.

To Experiment with New Features

Even someone who is a veteran in the industry may need some time to get used to a different piece of software. This is especially true if it offers in-depth analysis tools, real-time quotes or some other change from what they are used to. It is preferable that they do this with dummy cash.

If we look at the example of the IG platform, we can see that their forex demo account provides $10,000 of virtual funds and is available for free as mobile apps. Someone who hasn’t tried mobile trading yet will want to experiment this convenient approach with dummy funds before using their own money.

It is also fairly common for platforms to be updated. If the broker brings in a new feature like charting tools or comprehensive market scanners then it may not be immediately obvious how this should be used. Again, even a brief period of familiarisation can help to avoid problems or doubts in the future.

To Test New Strategies

The best traders never stand still and don’t always stick to the same strategy. Some of the most common strategies include scalping, fading and daily pivots. However, a full-time trader will want to master as many other strategies as they can.

They may also want to adapt to the current circumstances with new ideas and alternative exit strategies. For example, is there a trend that the right automatic trading rules can help take advantage of? Being aware of the global economic situation is one thing, but traders must also know how to make a profit from all of that information.

Adopting a more aggressive approach or looking at shorter-term opportunities on day trading are some of the ideas that an experienced trader might like to try with demo account funds rather than using real money.

To Try New Markets

Not every trader is an expert in every single market. For instance, a forex expert may decide to move into stocks and shares or vice versa. While some of the same principles apply, it is still a new way of trading that they need to adapt to.

Even within a type of trading, there are different markets and ways of operating. If we concentrate on different forex markets then we can see the likes of spot markets, forward markets, and swap trades. Then there is the question of specializing in certain currencies or looking at emerging opportunities in other countries.

Economic conditions may mean that a market that is usually profitable becomes less attractive. This means that a trader who has been successful in one market has to switch to something different. If it has been some time since they did this, refreshing their memory with no risk may be a good option.

Overall, expert traders clearly have very different needs from newcomers. But yet, it would be foolish to ignore the advantage of using dummy funds from time to time.

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