Traders often tend to dismiss the importance of a demo account citing various reasons from merely calling it as being too safe to the psychological aspects of traders tending to take on more risk. Such reasons are more evident with traders who have been trading on a live account. However, whether you are an experienced trader or just a beginner to trading, a demo trading account can in fact be very beneficial to your trading success. Here are three ways in which traders can make use of demo trading in order to help them succeed.

Hone your money management skills

If you don’t believe a demo account actually reflects live market conditions, then at best it can help you to practice your money management skills. It is often said that traders should not risk more than 1% of their equity when trading. This means that under a live trading condition, traders need to have a minimum of $10,000 with a higher leverage in order to trade profitably while sticking to the 1% rule. It would be futile to expect a beginner to risk $10,000 of their hard earned money in a real trading account. This is where a demo trading account can help traders to trade with high capital in virtual funds but at the same time allows them to manage risk and perhaps get better at it.

Fine tune your trading strategy

Before you put your new trading strategy to the test, it is always better to fine tune your trading strategy to the point that you can recognize the strengths and weakness in your trading. This is where demo trading can be of great help as constant use of your trading strategy on a demo account over a period of time and under different market conditions can help you to get more comfortable and familiar with the trading system. It makes no sense to risk your real money with your trading strategy simply because you believe that a demo trading environment will not offer the same market conditions as that of a live trading account.

Get to know the markets better

A seasoned trader will tell you that not all markets are equal in terms of behavior or the fundamentals. What better way to understand or experience this than to practice in a demo account. Traders would be surprised to also know that your best performing trading system might in fact give different results when using it on different markets altogether. This is where demo trading can help you pick out only the best markets to trade and one which could maximize the potential of your trading strategy. Again, this wouldn’t be possible if you were trading with real money on a live trading account.