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The Benefits of a Demo Account

The Benefits of a Demo Account

Trading futures can be a lucrative pursuit for the trader ready and willing to invest his time and energies in learning the ropes.  Unfortunately for the inexperienced, the potential losses of futures trading are so vast that even one wrong trade without the proper stops and mitigating steps in place could totally wipe out your trading balance (and potentially beyond), so it’s absolutely vital to make sure you understand exactly how to proceed before you start taking real life positions.

The theory of futures trading can be a significant advantage to have on side, and if you’re comfortable with the various different concepts, techniques and strategies commonly used by more experienced traders, you can have a good head start on the markets.  But, as with most things in life, there is no substitute for extensive practice, and by far the best way to practice and develop your skills is through a free demo account.

Demo accounts are offered by most, if not all, of the leading futures brokers as part of their marketing strategy.  Winning over new clients in an intensely competitive market requires both a solid system and a means of showcasing it to the world, and demo accounts are the tool of choice for brokers looking to attract new traders.  From the trader’s perspective, the demo account provides the ideal climate in which to trade futures contracts without resorting to putting their capital on the line, and allows for fundamental mistakes to be made in a safe but realistic environment.

Perhaps the main advantage of demo futures accounts is the ability to become acquainted with a trading platform and to place your first trades without the fear of incurring any losses. For a new trader with little to no market experience, the importance of this shouldn’t be underestimated – the demo account provides the ideal sandbox in which to test out both the practical elements of choosing, pricing and executing a trade, alongside giving the perfect risk-free environment in which to try out strategies you will later employ for real.

Furthermore, by trading on real markets with a rolling capital balance, you can better understand how your trades would perform if you were trading for real.  The realism afforded by a demo account is second to none, allowing you to trade on real markets and in real time, with the results of your trades affecting the extent of your capital balance.  Effectively, the demo account allows you to become just one-step removed from trading for real, eliminating risk while allowing full market trading functionality.

The demo account will also give you an idea as to the costs associated with your trading, the cost of carry etc., before investing for real.  This is essential in helping to develop an innate sense of pricing and value for money which often takes new traders some time to grasp.

Trading futures with a demo account is the ideal way to start your trading career, and without a doubt the best education tool for any would-be futures trader.  By removing the risk component while retaining the realism of trading markets, demo accounts allow traders of all stages to try out futures trading before investing any of their own money.

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