How to Open a Demo Trading Account

There's every chance you could be an investor par excellence or the next Warren Buffett, but it would be wise to test your trading skills before you start risking your own money. If you've always fancied playing the stock exchange or foreign exchange markets, signing up for a free demo trading account will be the safest way of dipping your toe in the water. A demot account lets you test your investment abilities without putting actual money on the line.

Step 1

Sign up for an online demo trading account with brokers such as NobleTrading, OptionsXpress or AVA FX. Although the process varies depending on which service you decide to use, all you'll typically need to do is tap in a few of your personal details and choose a username and password. Never pay for a dummy account. There are plenty available for free. Make sure the demo account you choose exposes you to real-time market conditions and prices.

Step 2

Read any free educational information provided by the broker you choose. Many demo accounts let users access investment advice and trading webinars. Take the time to review as much information as you can before you start trading. It will be in your broker's interests that your first experience of trading goes as smoothly as possible, whether you're investing real money or not, so most offer valuable tools to help set you off on the right foot.

Step 3

Research the market and manage your account as if you were investing your own money. If you're trading stocks and options, keep an eye on the business pages for news that could affect your investments. Consider setting up a second demo account to monitor alternative strategies. Constantly monitor your portfolio to help you get a feel for price fluctuations. You'll need to learn when to hold your nerve and when to cut your losses.

Warning

  • Just because you make money using your demo account doesn't mean you'll be successful if you choose to open a live account and start trading with real money. Don't be tempted to pour a lot of cash into a live account if you can't afford to lose it.

Photo Credits

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About the Author

Michael Roennevig has been a journalist since 2003. He has written on politics, the arts, travel and society for publications such as "The Big Issue" and "Which?" Roennevig holds a Bachelor of Arts in journalism from the Surrey Institute and a postgraduate diploma from the National Council for the Training of Journalists at City College, Brighton.

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