Ever since the world was first introduced to the concept of a cryptocurrency back in 2008 it’s been a rollercoaster ride not just for Bitcoin, but for all the currencies that have followed. But it wasn’t until the great Bitcoin boom of 2017 that these new ways of making transactions came to the attention of the general public with tales of early investors finding themselves to be millionaires.
The news of these stories, however, overshadowed an increasingly popular alternative form of speculation in the form of trading cryptocurrencies.
The well-publicized volatility of Bitcoin and other cryptocurrencies, however, means that before embarking on trading you should be as well prepared as possible – and one of the best ways of doing this is by using a demo account.
A demo account is an account which allows you to practice trading of both cryptocurrencies and fiat currencies without using actual money. This means that there’s no risk – and the reward is a greater understanding of the market and how it works on a day-to-day basis.
The vast majority of the trading platforms out there offer demo accounts. They might not exactly replicate actual trading, but they do give a very close approximation. Furthermore, they are generally time-limited – on average they will give you around 30 days’ free use before you have to sign up to trading for real.
Finding the right demo account
Looking for a good Forex demo account that gives you as long as possible to find your feet is a key consideration for would-be Forex dealers, along with many others, when you’re choosing the right one for your needs.
Of the many benefits of using a demo account, some are obvious, others are less so. Falling into the first category is the fact that it allows you to become accustomed to the language and mechanics of trading which can otherwise be a little confusing at first. It also, naturally, lets you gain confidence in carrying out trades knowing that even if the market proves to be going against you, no real money is at stake.
Different trading platforms also suit different kinds of traders so this also gives you the opportunity to try out several platforms before committing to one in particular as there’s no reason why you shouldn’t have a number of demo accounts running simultaneously.
Similarly, it’s an ideal way to try out different strategies which seem to be most successful and even whether using one of the available trading bots might be the best option for you.
It’s important to note that while demo accounts aim to replicate “live” accounts as accurately as possible, there are certain differences. For example, in the latter it is relatively easy to adjust your level of leverage as market conditions change but this can be trickier with a demo account.
Similarly, they might not be representing accurately the charges that may apply to live accounts and will not include any bonuses you receive when you start trading for real.
Taking the emotion out of trading
Hopefully, you can make allowances for these differences and focus instead on one of the less acknowledged benefits of a demo account – the fact that it allows you to trade while remaining emotionally detached. In all forms of speculation, emotions can easily derail plans either through exhilaration at success or disappointment when things go the other way. But, by getting a grounding when emotions are not involved, means that this is a behavior that can be carried over into actual trading.
Even if you do let emotions creep into your demo trading activities, this can be no bad thing. That’s because it will allow you to develop methods and strategies to cope with mood swings in either direction that can otherwise have a major effect on your trading performance.
Last, but not least, using a demo trading account will give you the time and flexibility to work out the best routine for you. With markets open 24 hours a day this is ideal if you also have to juggle other elements in your life such as other work and family commitments. Being able to comfortably fit trading into your day means that you will be in a better frame of mind to make considered judgments rather than rushing decision-making processes.
So, with all these points in mind, opening a demo trading account certainly seems like a no-brainer for anyone who wants to give themselves a serious chance of success in cryptocurrency trading. In fact, it could well be classified as essential.