Common questions relating to demo trading

If I’m successful with demo trading, will it translate into successful live trading?

While demo trading provides valuable practice for live trading, there's no guarantee of success in live trading. The heightened emotional aspects of live trading, along with real market conditions, can affect performance.

That said, a demo trading account can benefit you by helping you to put theory into practice and to experiment in a risk-free environment, which can in turn help you to improve your trading performance.

What happens if I run out of funds in my demo account or want to add additional virtual funds?

Your demo trading account offers you the opportunity to experiment with new trading strategies, which may or may not pay off. If you've taken a risk and it's resulted in losses, there's no need to worry -- not only are you not risking any real money, but you can top up your account at any point.

This is also a useful feature even when you haven't run out of funds. You might want to add more virtual funds if you want to trade with bigger lot sizes, as you won't be able to enter into a trade if you don't have sufficient virtual funds available.

On most demo trading accounts, you will start trading with a set amount (for example, $10,000), but you can select an option to add funds to your account whenever you want or need to.

Will I see slippage in my demo account?

Slippage is the difference between the price at which you expect your order to be executed and the final price at which it is actually executed. Slippage can be either positive (when you get a better price than you'd expected), and negative slippage (when the price is less favourable than you expected).

Slippage may happen when a price changes exactly as an order is executed, or in volatile markets where the price is moving very quickly.

In a demo account, no real money is being spent, but the environment still mimics real life trading. You will get an opportunity to see the impact slippage will have on your trades. You can also experiment with using guaranteed stops to minimise the impact of slippage.

I’m exploring trading options in my demo account, but some of the markets for stocks I want to trade are showing as closed. Why is this?

Certain markets, including stocks, do not trade 24 hours a day. You can find specific dealing hours in the deal ticket 'market info' tab.

For example, if you are trading in UAE time, but trading stocks on the US market, the main session for stocks will only open at 17:30 GST.

Which is better – back testing or demo trading?

It depends on who you ask. They can both be valuable ways to test the performance of a trading system (the set of rules you might use to trigger

It depends on who you ask! They can both be valuable ways to test the performance of a trading system (the set of rules you might use to trigger buy and sell signals without any ambiguity or any subjectivity).

Back testing is a method of analysing the potential performance of a trading strategy by applying it to sets of real-world, historical data. It's based on the idea that strategies that have produced good results on past data might perform well in current and future market conditions. The idea is that trying out trading plans on previous datasets that closely relate to current prices, regulations and market conditions can help you to test how well they perform before making a trade. Remember, past performance is not an indicator of future results.

It's also important to remember that trades incur fees that may not be included in back tests. These need to be accounted for when performing back testing simulations as they will affect your profit-loss (P/L) margins on a live account.

Demo account trading is a form of forward performance testing. It's another useful way to test a trading system. While your back test might have shown you positive results, forward testing on a demo account can give you a more complete idea of how your system will fare moving forward and whether you need to make adjustments given the current market environment.

Trading advice suggests monitoring your emotions. Why is this important and does it work in demo trading?

It's hard to overstate the importance of understanding your emotions when trading. The two main emotions that we know tend to influence trading decisions adversely are fear and greed.

Nobody wants to admit to feeling either of them, but most of us will experience these two emotions when trading. Fear might manifest as a reluctance to enter a trade or the closing of a winning trade prematurely. Greed often looks like adding more capital to winning trades or over-leveraging with the aim to profit from small moves in the market.

You might think that trading in a demo account isn't subject to these emotions, but the truth is more complex. If you've ever found yourself staying up late trying to break through to the next level of a video game, pacing around your house to hit a daily step target, rushing to complete a language lesson so you don't break your "streak", or posting your word puzzle results on social media, you'll know that humans can get strangely attached to numbers, wins and losses, even when they don't have any real-world impact or consequence.

Traders who use demo accounts are often surprised that the feeling of losing a trade still stings when the money isn't real, even if it's less intense than with a live trade. And winning still feels good, even when there's no real pay out.

Although your emotions might be "muted" with demo trading, they are still in action. Paying careful attention to them and learning how to stick to your trading strategy despite them is good practice for live trading.

Read more about the psychology of trading here.

If you have specific questions about your own demo trading account, check whether your provider offers a community forum or knowledge base where you can ask for support or find others with specific questions.

You can also browse IG Academy for more tips and resources to help you sharpen your trading skills.