CFD Demo Accounts

CFD demo accounts are a great way for UK investors to practise trading risk-free. Not just ideal for new or inexperienced investors, a paper trading profile can be the ideal place for traders to test a new strategy in a simulated environment. This guide will cover the pros and cons of using a CFD demo account, how they work and tips for getting started. We also list the top brokers offering CFD demo accounts to UK investors.

What Is A CFD Demo Account?

A CFD demo account is a simulated profile offered by many of the best online brokers. They aim to recreate the virtual experience of a live trading scenario.

Also known as paper trading accounts, these profiles essentially provide a risk-free opportunity for investors to learn platform features and get to grips with how contracts for difference work. They also provide a great setting for experienced traders to build and test a new or risky strategy.

Today, the majority of brokers offer some sort of practice environment for UK traders. However, the amount of virtual funds available and the duration that demo profiles remain active for varies. Brokers with CFD demo accounts also provide different financial assets with varying access to instant and delayed market data.

Demo Accounts Vs Live Accounts

The main difference between a CFD demo account and a live profile is that you do not risk losing any money with a practice account. You can place trades, amend charts or play with leverage, safe in the knowledge that your simulated positions won’t result in any financial losses. Pre-determined or flexible virtual balances are provided so you don’t have to practise trading with any of your personal capital.

The best brokers with CFD demo accounts will simulate real-time market conditions, meaning you can practise against live price shifts. Virtual leverage, spreads and commissions may also be applied to accurately mirror the live trading experience.

With that said, there are some key differences between CFD demo accounts and live trading profiles:

• Additional Fees – You will not incur actual costs with a demo account profile. This means there are no overnight financing charges, trading commissions or floating/fixed spreads to pay. Equally, access to the broker’s CFD trading platform should be provided for free.
• Flexibility – You have full flexibility within a paper trading account to open various positions of different sizes to explore different strategies. The only caveat is that most brokers will often have a minimum and maximum trade size.
• Price Movements – Positions opened via a paper trading profile will not normally be subject to slippage or out-of-hours price movements. Slippage is the difference between your order price (or expected price) and the actual price you end up buying or selling at.

Brokers Offering CFD Demo Accounts

Below is a list of several CFD brokers that offer demo accounts to UK investors:

• CMC Markets – Up to £10,000 in virtual funds, simple online registration (email address only), no time limit, available on proprietary terminal or MT4, secure login
• FXCM – Up to £50,000 in virtual funds, simple online registration (email address only), no time limit but only Monday to Friday paper trading, secure login
• XTB – Up to £10,000 in virtual funds, simple online registration (email address and contact number), 4-week time limit, available on proprietary terminal or MT4, secure login
• IG – Up to £10,000 in virtual funds, more detailed online registration (name, email address and contact number), no time limit, available on proprietary terminal or MT4, secure login
• eToro – Up to £100,000 in virtual funds, live account sign-up is required before being able to select ‘virtual portfolio’, no time limit to switch between live and virtual profile. Clients can also utilise the copy trading feature in the demo account setting

Importantly, all of the examples above provide paper trading services for free.

Pros Of CFD Demo Accounts

• No Risk – CFD demo accounts are a great way to practise a new strategy, learn trading techniques or make risky decisions without the chance of losing real money
• Learning – A demo profile without a time limit means you can spend time identifying any strategy shortcomings or faults and highlight key success points when making CFD trading decisions. It might also be worth keeping a journal
• Build Confidence – Making investing decisions and being rewarded with hypothetical profit can build trading confidence. Additionally, experiencing failure can help tighten risk management strategies before real money is on the line
• Practise – Paper trading profiles are ideal for complete novices to get to grips with trading CFDs. Play around with charting features or experiment with a new indicator without risking cash

Cons Of CFD Demo Accounts

• Access To Features – Some brokers do not permit access to all trading terminals, tools or instruments within a CFD demo account. This may include being able to use advanced graphs, copy trading features or strategy builders
• Emotional Disconnect – The comfort of trading with virtual funds in a completely simulated environment does not allow you to experience the psychological emotions of trading with real funds. It is easy to become risk-averse when high stakes aren’t on the line
• Real-Life Trading Conditions – A broker may not provide access to truly live trading conditions within a paper trading profile. You may experience simulated pricing, tighter spreads or reduced commissions
• Commissions – Not all brokerages will reflect the true expenditure associated with a live trading account. You may practise a specific strategy and come out with an acceptable profit margin within a demo profile. However in real-money trading, trading fees could quickly eat away at profits
• Slippage – Typically, orders within a demo account are executed instantly. Therefore, inexperienced investors may get a false feeling of confidence that doesn’t take into account real-life slippage (when the price at which your order is executed does not match the price at which it was requested)

Getting Started

Choose A CFD Demo Account

Firstly you will need to find a broker that offers CFD demo accounts to new or existing clients. Information may be found on the broker’s homepage, via the FAQ section or in the account registration area.

If it is unclear, it might be worth reaching out to the broker’s customer service team to ask if a practice account is available. Alternatively, use our list of the top CFD demo accounts in the United Kingdom.

Comparing Brokers

The best brokers will provide a free CFD demo account containing all of the features of a live trading profile. This will include access to real-time market conditions, flexible trade sizes, leverage opportunities and wide market access.

It is also worth checking if the paper trading account is available on mobile devices. Get everything you would expect from a desktop paper trading account, including chart trading and technical analysis tools on your smartphone or portable device. Practise monitoring the markets and managing a CFD portfolio while on the go.

Also look out for additional features on the broker’s website that may come in useful when you progress to a live trading account. This could include educational content, a transparent fee structure and 24/7 customer support.

Register For A Demo Account

Once you have found a suitable broker with a CFD demo trading account, create a new profile. This is usually a simple process, requiring online registration only. Most brokers require basic personal details such as an email address and contact number to get started.

You can usually open a CFD demo account for the broker’s proprietary terminal or via the industry-renowned MetaTrader 4. Once an account is created, log in and start trading.

Practice

Once you have registered and opened a paper trading profile, you can begin investing. Spend some time understanding the features of the trading terminal, including all the tools and function buttons. It can feel quite complex at first, particularly for new traders.

Once you feel comfortable with the platform basics, start trialling simple trades before utilising advanced charts, graphs or indicators. Some professionals suggest beginners should place 50+ successful trades before committing to a live trading account.

Remember, there is no monetary risk involved so don’t be afraid to test a technique or strategy that feels risky.

Monitor

As they say, practice makes perfect! Even though no real money is at stake, it is worth taking notes and learning from the experience. You may find an asset of interest, learn a new strategy or become comfortable with a particular trading indicator.

And remember, there is no rush. An interesting find from Barber Lee in the paper ‘Do Day Traders Rationally Learn About Their Abilities’, indicated that 80% of day traders give up within the first two years of trading. With this in mind, start your journey slowly and when you have mastered the basics, invest small amounts to begin with. You can then look to build a long-term CFD investing career.

Bottom Line On CFD Demo Accounts

No matter your experience, CFD demo accounts are a useful tool. They provide a risk-free environment to test strategies, learn platform features or get to grips with a new asset. With no real money investment needed, you can view a broker’s offering before committing to a live profile.

Remember though, don’t become complacent. A false sense of security can be created, which often doesn’t play out in the real world.

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