Demo or Real Account?

Spread betting, like any other form of speculation, carries an above average risk for an above average return of your capital. This is something we already know and as spread bettors we are ok with the risk taken to profit from the markets as long as we stick to our money management rules.

The learning curve of trading can be very steep and if you are just starting out then you should really consider starting out trading with a demo account.

What is a Demo Account?

A demo account is a free trading account that allows you to trade on the spread betting platform using “virtual money”. Most demo accounts allow you to trade across a full range of instruments and use important platform features such as the stop-loss and limit orders.

tradefair demo account

Most, if not all, spread betting platforms offer demo account for users for an unlimited period of time. However, some firms such as City Index will limit the demo account activation period for 2-3 weeks. Afterwards, you can either choose to open a live account and deposit real money, ask your City Index personal account manager for an extension on your demo account, or you can sign up a demo account on another platform.

>> Compare all spread betting demo accounts here.

Why Start with a Demo Account?

It´s very simple: at the beginning you will make mistakes, you will not take good positions and you will overtrade your account. Most importantly, you will almost certainly not make a profit.

The idea behind starting out with a demo account is basically for you to find yourself as a trader, to develop a system and for you to be able to review your trades and learn what is working and what´s not. Moreover, by doing this on a demo account, you will cut to zero your learning costs because you will be doing your trials and errors with paper money.

Starting out with a demo account

Even though we highly recommend you start with a demo account, you should definitely treat it as a real one. It sounds somehow illogical to treat fake money as real money but remember that it´s all about your psychological training as a spread bettor.

The first thing you need to do is to decide on is the amount you want to trade with. If you have decided to fund your real account with £10,000 once you are consistently profitable on your demo account, you should open a demo account with £10,000 as well.

This is important because even though it´s exciting to make a one million dollar trade, the thrill is just temporary and when you do migrate to your real account you won´t find it as exiting and you might trade too big or take excessive risks. This is pure psychology; you are training your brain to a fixed bet size. Learn more about bet sizes and your required trading capital in our lesson here.

Once you have your demo account opened, try a few spread bets with the minimum bet size your brokers allows (usually 50p-£1). This will help you to get familiarized with the trading platform and allow you to eliminate dumb mistakes like clicking on the wrong buttons with a minimal loss (even though this is paper money we are training our brains and shaking out emotions from our decisions).

The next step is the easiest one; try what you have learned and try to develop a profitable system. This is why we begin with a demo account in the first place.

You should try scalping the markets and if that isn’t for you then you might want to change to day trading and sometimes even holding a winning position overnight for a few days to capitalize from a much bigger move (see rolling bets).

Remember that beyond just developing a system, we are training ourselves to be able to hold on to those winning trades and cut your losses worth.

Once you are profitable, or with a few weeks on your demo account without making silly mistakes and sticking to your rules, it’s time to move to a real account.

Your first real spread betting account.

It´s time to take the big step to trade with real money.  You might think that being profitable on a demo account for a couple of weeks or a couple of months is sufficient to jump in and trade the same bet sizes; well you´re wrong.

Remember that even although you opened a demo account with £10,000, it´s still a demo account. You might be ready to trade real money but psychologically speaking you are not ready because you haven´t made a real money trade just yet. More so, a 2% loss of your account might be too much at first so you might want to start with the minimum bet size the first few trades so you get used to actually risking real money to profit from.

Once you build your confidence up you can start trading live following your risk management rules and the system you perfected during your demo phase.

Trading is about finding what works for you – everybody sees and analyzes the market differently. Even though we might take the same side on some positions, our entry rules will always be different.

In order to be a successful spread bettor, you must start off with a demo account, build your confidence up and train your brain to shake out your emotions when you are making important trading decisions. This is the only way you will succeed in this game.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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