What is a Demo Account for Stock Trading?

  • 6 mins read ●
  • Last Updated:

We can only imagine how excited you are to invest in your first stock. I mean, you’re four levels, thirty-four blogs in – surely you are ready to pop that wallet open and trade away.

Well, unless you enjoy the adrenaline rush of blowing your money. In that case, go ahead, open a live account and start trading! Otherwise, the rest of us, let’s talk about the best ways to trade and invest your money – start with demo trading.

First, What is Stocks Demo Trading?

A demo trading account, also known as a paper trading account, essentially gives you the option to trade in a simulated, real-time market environment that aims to recreate the stock market conditions as closely as possible but without having to risk your capital. In other words, you are trading with virtual money. 

When trading demo, traders and investors have access to most features available on live trading retail investor accounts, including stock charts, technical analysis indicators, trading tools, real-time prices, and more. These days, most brokerage firms offer a demo trading account so a trader can practice with virtual money and get familiar with the platform.

What Does it Mean to Demo Trade?

You can think of demo trading as a trading software simulator that provides you with a real-time experience using virtual funds. Just like a car simulator when you were learning to drive – you can use the trading simulator to find your way in the stock market.

The main difference between trading demo and live trading is that your capital will not be at risk as essentially it is virtual money (or virtual funds) you trade. This gives traders and investors the platform to practice their trading skills, gain experience, get familiar with the broker’s trading platform, develop a trading strategy, experiment with confidence, and complete peace of mind with zero risks.

In sum, stock demo accounts provide a unique way to get a first-time stock market experience without having to risk your capital. And trust me, there is nothing more annoying than losing money due to technical issues like clicking on the wrong button. So even if you have some trading experience, opening a demo account and getting familiar with the platform is always helpful. Always!

How Does Live Trading Differ From Demo Trading?

To put it simply, a real trading account funded with real money is a different beast altogether compared to demo accounts and their virtual funds. It’s like sparring against your cousin and fighting Floyd Mayweather.

One of the factors that make a significant difference between trading live and the trading demo account is trading psychology and high-risk tolerance. Your mind works entirely differently when you are risking YOUR money.

For example, many investors stated that while using the demo account, they take their time to think clearly and rationally, but when it is their capital on the line, it is a different story and many are losing money rapidly. Unsurprisingly, many people open a demo account and make big profits in several days. The logic – Trading is different when emotions are not part of the game.

It takes time and patience to prepare yourself for the emotion attached to having real capital in the game. And that’s something we will cover later in this Academy – Trading psychology and risk management. Many have done it, and so can you!

So remember – patience, hard work, and consistency. But when it comes to trading on a demo account – use it only to get familiar with the platform and test different investment strategies (especially if you are planning to develop an automated trading machine). 

How to Choose the Best Demo Trading Account?

Most brokers let you open a free demo account through their platform to trade stocks and other assets, but if you need help picking the right one, you can always visit our broker comparison page and find brokers that offer the best stock demo accounts. 

You can open a demo trading account for other markets too. Many brokers usually offer to trade forex, stocks, indices, ETFs, bonds and fixed income assets, and cryptocurrencies. 

That said, there are several factors that you should consider before choosing a demo account.  

Trading Platform

First, you must check the type of trading platform the broker offers. Many brokers these days offer the most popular trading platform, the MetaTrader4 &5, which is an excellent option if you plan on trading CFDs and FX currency pairs. Other brokers provide in-house trading platforms or web trading platforms. This way or the other, before you open a demo account, try to figure out if this is the platform you want to trade on, and if not, choose another brokerage firm that offers the one online trading platform that is best for you.

Selection of Assets

Each stock trading account has a different policy of fee charges, spreads, minimum deposit requirements, leverage, and selection of assets. Obviously, you want to find a trading account that gives you the ability to watch and trade many markets and financial instruments. Even if you plan to focus on just one asset, it’s always good to gain access to many assets on one trading platform. So, check it with your prospective broker before you open a demo account. 

Charts, Indicators, Tools, and Features

Trading platforms come with a wide range of sophisticated tools and features to help traders analyze the markets and become profitable. For example, many traders are looking for an advanced charting package, level 2 order book, news and updates, indicators, plugins, and more. So, when you open a demo account, check what features and tools are available and if this is enough for you to trade on a live trading account.

Non-Expiring/Expiring Demo Account

At last, another factor to consider is whether the broker offers you a non-expiring demo account. Now, this is tricky. Why? If you don’t have a specific need for an unlimited demo account, then don’t ask for it. It’s better to practice on a demo account for one to three weeks and move on to a live trading account.

However, some traders prefer choosing a broker that offers a non-expiring demo account, meaning you can always switch between the real live account and the demo mode. For some traders, this is a valuable feature. Typically, these traders want to test different trading strategies, especially those who wish to utilize trading algorithms and automated trading machines.

The Bottom Line – Put Your Theory Into Practice by Trading With a Demo Account

Demo accounts, also known as practice accounts, are an invaluable platform most stockbrokers offer. Unfortunately, beginner investors often burn their first account when live trading, as they fail to develop the necessary day trading skills, mindset, and discipline needed to succeed in trading the live markets.

The benefits of practice trading with a demo account cannot be denied. Seriously, there is no better way to put the theoretical into the practical and gain experience than creating a demo trading account. This way, you can learn how to buy and sell stocks, place stop and take profit orders, analyze assets on trading charts, add technical indicators, and monitor your trading account. 

There is no shame in creating a demo account. In fact, it’s a platform designed for traders to practice, gain experience, and develop their skills further to make a potential impact in trading the stock market later down the road. 

But don’t let us fool you. Demo accounts are not only used by newbie traders. Many experienced traders and investors use demo accounts to test strategies, trade sizes, trading algorithms, and risk management techniques.

Now, if you are ready, let’s set you up with a demo trading account.

In partnership with our recommended partner SwitchMarkets partnering broker logo


1Register with Switch Markets.
2Verify your identity.
3Unlock Trade Together program for free!
Learn More

"Join our Trade Together program and interact with us in real-time as we trade the markets together."

HowToTrade Coaches
Expand Offer

Save $228 on our Trade Together program, paid for by our partner.

Learn More

Save $228 on our Trade Together program, paid for by our partner.

Learn More