Trading on demo account

What is a demo account

A demo account is a trading simulator provided by trading platforms that allows users to experience the operation of the platform and its various features without using real money. This gives potential clients the opportunity to practice and explore the platform's interface, understand its features and evaluate its usability before they decide to open a real account.

This account allows traders to learn the basics of trading, familiarize themselves with the functions of the trading platform and test various trading strategies in conditions as close as possible to real market conditions.

You can open a demo account on any market you are interested in: crypto, forex, stock market, etc.

Demo account vs paper trading

Demo accounts are an alternative and automated way to trade on paper.

Paper trading is the process of simulating real trading in the financial markets without using real money, but in this case the trader records his trades and monitors their changes manually in a notepad or any text document on the computer.

Demo accounts became popular with the advent of online trading and replaced the outdated way of testing trading strategies and skills called "paper trading". A demo account on an online platform allows users to buy and sell assets in live market situations with the same features as real trading on the stock exchange. Thus, a demo account on the stock exchange gives you the opportunity to test its functions and get used to the interface.

When to use a demo account

First of all, a demo account is ideal for beginners who are just starting to learn the basics of trading on financial markets. It allows beginners to familiarize themselves with the trading platform interface, understand how various functions and tools work, and learn how to analyze market data without the risk of losing real money.

In addition, a demo account is useful for experienced traders who want to test new trading strategies or approaches. Virtual trading allows them to experiment with different approaches and evaluate their effectiveness in real market conditions, but without financial risks.

Another case when it is worth using a demo account is when switching to a new trading platform. Even experienced traders may find it difficult to work with the new interface and functionality. A demo account allows them to adapt to the new environment and understand how to effectively use new tools and features before they start trading with real money. For example, you have been trading cryptocurrency assets on the WhiteBit exchange all the time, but now you have decided to try your hand at forex and have switched to the MetaTrader 5 platform: in this case, a demo account will help you familiarize yourself with all the subtleties of working on the new platform.

Advantages of trading on a demo account

The main advantage of trading on paper is the absence of financial risk. Traders can learn the basics of trading, test new strategies and practice risk management techniques without fear of losing their money. This makes a demo account an ideal tool for beginners who are just starting to master trading, as well as for experienced traders who want to test new approaches.

Trading on a demo account is also useful for testing and practicing new strategies. A demo account can be a kind of laboratory for research and development of trading approaches. This is especially important in situations where a trader is going to trade multiple markets, as the strategy prescribed for crypto trading may be different from the strategy for forex.

Traders can experiment with different approaches and trading methods, analyze their effectiveness and make adjustments without pressure or fear of losing real money. This allows them to develop and optimize strategies that can be used in real trading.

Another important advantage is the ability to analyze and correct your own mistakes. Traders trading on a demo account, as well as on a live account, should record their positions in a trading journal. Thanks to this, they will be able to analyze their virtual trades, identify mistakes and develop plans to prevent them in the future. This helps to improve the overall level of skills and increases confidence in their own abilities.

In addition, a demo account gives you the opportunity to learn the functionality and interface of the trading platform. Different platforms may have their own features and tools that need to be understood and mastered before starting real trading. Using a demo account allows traders to comfortably adapt to a new platform and learn how to use all its features.

Finally, a demo account provides an opportunity to learn how to manage risk. Risk management is one of the whales on which successful trading stands, because even if you have a trading strategy with an unrealistic WinRate, you can lose all your capital by not respecting the risks.

You can experiment with different money management methods and determine the optimal risk levels for your trades depending on different factors: for example, your confidence in the performance of a set-up or the selected asset. This helps to develop discipline and risk management skills, which are essential for successful trading on the real market.

Disadvantages of trading on a demo account

The main disadvantage of trading on a demo account is the lack of psychological component in trading, because when you work with fake money, you do not feel as responsible as when it is your real balance. The money you are given in a demo account has no real value, which is why traders don't experience the same level of stress and pressure that they do when trading for real. Even if you hone your trading strategy by trading on a demo account, you may not be prepared for the emotional pressure that awaits you in live trading with your deposit. Demo trading can give a false sense of confidence that may make a trader think he is ready for real trading with large deposits, but in the end, trading on a simulator with fake assets is much easier than managing your own capital that you are afraid to lose.

In addition, even if the trading simulator looks the same as the real trading platform terminal, there are various force majeure situations that can only happen in real trading. These can be slippages, delays in order execution, differences in liquidity and the like. Of course, slippages are not so frequent phenomena in the markets, but they do happen and a trader should know how to behave in such situations. A demo account will not prepare you for that.

The absence of financial consequences, on the one hand, allows you to hone your skills, but, on the other hand, often reduces the motivation to fully analyze charts before opening a position, because no money can suffer here. This is especially bad for beginners, as incomplete analysis can lead to more imprudent decisions, and if their results are also positive in such situations, these risky decisions can later be transferred to live trading.

Another disadvantage of demo-trading can be not taking into account the commissions that the trader pays to the exchange or broker for the realization of transactions on the real account. That is, again, there is no full-fledged picture of trading.

How to open a demo account at the WhiteBIT Exchange

WhiteBIT Exchange provides users with an opportunity to practice on a demo account. In order to get access to demo opportunities of the exchange, you need to go to the "Products" tab and select "Codes" there.

After that, click on the "Get Demo Token" button.

You will see a panel with Demo Token codes for DBTC and DUSDT (demo versions of Bitcoin and Tether, respectively), as well as brief instructions on how to activate them. Copy one of the codes and close the panel.

Then click the "Activate Code" button in the same menu on the left. A field for entering your Demo Token will open in front of you. Paste the copied code into the specified field, click "Activate". You will get 0.5 DBTC and 1000 DUSDT on your balance.

In order to trade demo tokens, you need to go to the "Trade" tab and find DBTC/DUSDT in the list of trading pairs.

This way, you can begin to familiarize yourself with the capabilities of the WhiteBIT exchange and the different types of orders.

When to move from demo to live trading

Demo trading is not an obligatory step on your way, but it gives you the opportunity to understand the interface of the trading platform so that you do not have to think about whether you are pressing the right button. There is no exact timeframe after which it is definitely time to move on from the demo, but for your comfort, it is best to start real trading when you are sure that you have mastered the trading platform with confidence.

You should understand how to use all of its features, from placing orders to using the analysis and risk management tools. Practicing on a demo account should help you feel comfortable with the interface and features of the platform.

You should feel confident - then you can start trading with real funds.

Those traders who decide to use a demo account to hone and test their trading strategy can usually be divided into 2 categories.

The first category is those who postpone the transition to a real account for too long, lacking determination and courage. If a trader spends a year on a demo account, hesitating to start real trades, despite the proven strategy, profit and risks taken into account, it clearly indicates a fear of real trading.

In such a situation, you need to overcome your fears by trying to transform your "fear" into "I wonder how my trading strategy will work out in real life".

It makes no sense to keep postponing the transition.

The second category is those who are in a hurry and move to real trading too early. Having made 2 profitable trades on a demo account, they immediately start trading on a real account. However, for such a short period of time it is impossible to study the market and the features of the platform. As a result, trading on a real account, they begin to make mistakes, as haste in this case leads to losses. Therefore, you should move when you are confident in your actions and skills.

However, many platforms give a limited amount of funds for trading on demo, as well as a limit on the time available for trading in the simulator. This means that when it runs out, there is little choice but to go live.

CRYPTOLOGY.KEY team's opinion about demo account

Demo trading may seem very attractive for traders at the beginning of their journey in the markets, but in reality, when a trader moves from a demo account to a live account, he or she faces many challenges, primarily psychological. If you consider a demo account as the first step on your way to becoming a trader, you should not stay on it for long, because when you move to real money, only then you will realize what psychological pressure is when trading with your own funds.

For this reason, it is best to turn to a demo account, first of all, in order to familiarize yourself with the trading terminal and the platform that you are going to use in the work. This is especially important for those who are just starting out, as understanding the functioning and capabilities of the platform is extremely important for successful work. Having studied the functionality and features of the platform, you will be able to quickly react to what is happening and without delay perform those actions that you want in live.
A demo account can also be suitable for experienced traders who, for example, decided to try themselves on another market with a completely different trading terminal or simply on another exchange.

To hone your skills, it will be more practical to try trading on a small amount of your own funds, because this way you will realize that you are responsible for your own balance, you will learn to manage capital and risks more accurately, and with the emergence of confidence and experience, you can slowly add volume to transactions.