Essentially, there are two major types of trading accounts in existence that you should know about as a new trader, that is, demo and real accounts. As you might have already guessed, demo accounts are meant for practice purposes. In fact, the name demo is the short form of the word demonstration, which means that these accounts are used for demonstration purposes. If you are just getting started with trading, you should open a demo account, which you can use to practice trading and gain the necessary skills. Ones you are more confident with your trading, you can proceed to open a real account and start trading with real cash.
In this article, I am going to look at the two types of accounts in terms of their definitions, pros, and cons associated with them.
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Demo accounts on Forex
In almost all forex trading platforms, demo accounts are offered to traders free of charge for purposes of training. Demo accounts are usually availed with virtual currency that one can use to learn the ropes of forex trading. The account is meant to help you learn how to trade in real markets. The theoretical knowledge you have can be put to use in these accounts. The accounts are useful because they remove the risk of loss that is often associated with real accounts where people have to trade with real money.
Advantages and disadvantages of demo accounts
There are several advantages associated with demo accounts include the fact that they are offered by almost all forex brokers. You don’t need to make a deposit into these accounts in order to use them and they allow you to polish your trading skills in a safe environment without risking your money. Through these accounts, you can study market conditions and develop test strategies to use. these accounts can also be opened, closed, and reopened any time one feels like using them.
If you use these accounts for too long, they end up thwarting your learning curve. They also kill your competitive skills. Since these accounts are meant to be safe, they do not impose any kind of emotional stress of traders, which may take away your emotional intelligence in as far as keeping your emotions in check is concerned.
Real Forex accounts
Real accounts are the kinds of accounts that people use to trade with real currency. These are the type of accounts you need to be trading with if you intend to make money or profit from forex trading. However, they are also the kind of accounts that can clear your entire bankroll and send you into bankruptcy.
Real accounts can be classified into cent or micro accounts, standard accounts, and premium accounts. The classification is usually based on the amount of money and size of trades you can place. Most brokers offer all three types of real forex accounts. Thus, the trader has the choice to choose which account most accommodates their goals and trading strategies.