Advantages
- Studying the basics of trading. Trading is not only about selecting correct instruments for market analysis but also about knowing how to control your position, close it timely, and look for new opportunities to enter the market
- Checking new strategies. Checking new trading ideas is useful not only for beginners but for experienced traders as well. This account type allows for testing your tactics on the asset history
- Working with new instruments. You can add new instruments to your portfolio, study their behaviour on a demo account, and choose the best strategies for each one.
Drawbacks
- Increased confidence. Losing real money is a painful experience that teaches traders to make better analyses, be more responsible, cautious, and as far-seeing as possible; and never to stop developing their skills. A demo account does not provide such an experience
- Unrealistic capital. Quite often, the capital on the demo account exceeds the real one that's available for the trader. The investor who is used to working with big lots struggles when having to trade smaller lots after switching to a real account
- Lack of trading experience. Without real trading experience, investors do not face the emotional tension that can affect real-life trading. Losing actual money can be a painful but valuable lesson, teaching traders to improve their analyses, be more responsible, cautious, and forward-thinking, and develop their skills continuously. A demo account cannot replicate this real-world experience.