Forex trading platform perhaps the only market where beginner traders can practice their skill before joining the real account. The FX offers the demo account facility, which is unavailable in other trading platforms, and this facility is providing the training opportunity for beginners. Using a demo platforms, traders are getting benefitted by knowing the condition of the market before joining the real trade.
Experts say that a newbie must use the demo account before playing the real game. Most of the traders do not understand the difference between these accounts, but there are some common features that can tell us about the difference between a demo account and the original account in FX trading.
List of the differences:
1. Title bar
If we find the title bar of our web browser, then we can easily see that a demo account is using the word demo. On the other hand, in a real account, we will not find the word demo in the title bar of the browser. Checking the title bar is the best option to find out whether someone is using a demo account or a real account.
When beginners use the demo profile, then their orders are filled automatically. It is a fast process without any delay, and each order is executed automatically because the algorithm does not have to check whether another investor is filling up the same order or not. In ETF investing, delay is a very big issue. So, carefully select your trading platform.
On the other hand, when we come to trade using a real FX account, we find that it takes more time to place an order as the algorithm needs to check thousands of factors in a second. Investors face delay in this case because the platform checks the behavior of the banks and other institutions in response to a single activity of a businessman.
In trading, slippage is a situation that occurs in the real account when the system gets reset automatically at a certain point, which was set by a trader beforehand. Actions such as stop-loss order or stop-profit point work in such a method because the businessman wanted to close his trade automatically when it reaches a certain point.
On the contrary, in the demo account, traders do not face slippage as the business is running in the sandbox. Opening and closing the financial instruments do not create any preset where slippage situation may occur.
4. Wider spreads
Most brokers do not take any charge from their clients; rather, they take commission spreads as the market maker. Based on each trade, they take their commission as a percentage from the profit and currency pairs such as USD/JPY or EUR/USD with a few pips can be used to cover the service costs. In a demo, account spread does not change as there is no broker, and profit is measured with the virtual currency.
5. Proof of identity
To use a demo account, investors do not need to prove their identities or address, but in the real account, an investor must prove his identities with necessary documents. A businessman may have to submit his id card, bank statement, and other legal documents as evidence for his identity if he wants to use a real account.
The most important thing is in a fake account, we need not invest any real money, and virtual currencies will be given earlier in the account to start a demo trading for buying and selling financial instruments. In a real account, at least $50 must be deposited to start all the trading operations.
To get the final thoughts, we may say that both of it play vital roles for a successful FX business as a demo account can be used as a lab to test the newer strategies, and an original account can be used to use the researched knowledge and make a profit. Experts believe that without using the demo account before, if an amateur goes to trade, then it can be highly risky for him.