Criteria for selection of the best demo account for trading on the Forex and CFD market

by Josh Biggs in Finance on 13th January 2021

Investing in currency pairs or contracts for differences requires appropriate experience, adopting an appropriate strategy and accepting a certain increased level of investment risk. Unfortunately, it cannot be avoided, but on the other hand — Forex and CFD markets offer extensive opportunities for investing and generating above-average profits in a relatively short amount of time. Therefore, it is sometimes worth taking the risk and testing one’s strength on the international foreign exchange market. In order to gain better knowledge of investing, young traders can open a demo account with the selected broker. What is it and how to choose one which will meet the investors’ expectations?

What exactly is a demo account?

A demo account, also referred to as a test account, is an account on which the trader is granted access to an investment platform from a brokerage firm — to a limited or full extent, as well as a pool of virtual funds that they can use as if they were using their own money. This way, they can test investment strategies, place buy and sell orders for selected assets without losing anything while doing so. The demo account provides a unique opportunity to test the investment and trading platform in practice. The investor learns whether its use is intuitive, how quickly the orders are executed and whether they have access to information materials within its scope.

A demo account on a trading platform becomes a tool for learning how to invest in practice, so it is worth making every effort to select a test account that will assist in learning the secrets of investing on the international Forex and CFD markets. The question is — how to do it?

What parameters should the perfect demo account have?

Most brokerage companies make demo accounts on trading platforms available to potential clients — Forex and CFD market investors. By doing so, they want to encourage them to test the platform and, at the same time, present their best side. Brokerage firms naturally want to win the client over, which is why demo accounts are usually fully functional and make it possible to find out how a real investment account works.

If we decide to choose a Forex and CFD demo account, we should pay attention to whether it will give us access to all or only some functions of the trading platform. It is possible that the broker will only make the basic tools available for platform testing, while other tools will be reserved for investors who are already trading their funds.

It is important for the demo account to function in conditions that are maximally similar to the ones that exist in reality. This way, clients can learn how to place buy and sell orders for individual assets, establish support and resistance levels as well as use leverage. The test platform which the demo account user has access to should also make the elements of technical analysis available.

You should verify the amounts of virtual funds made available by the broker on test accounts. The higher they are, the more the investor will be able to test their investment strategies.

Is there a fee for using the demo account?

Demo accounts on trading platforms are usually free of charge, although of course there may be exceptions to this rule. If — in exchange for not collecting a fee for testing the trading platform — the trader requires that after a test period, the client open a real account, it may also be a problem for them and one should consider whether it is worth checking out such a platform on the demo account. 

Categories: Finance