Demo trading tips from our analysts

Use your demo account to practise consistency

‘Does it feel like the moment you don’t place the trade is when it works in line with your strategy? Consider using the demo account to practise consistency in action on your part, so when you’re trading live you won’t miss the opportunity when it presents itself, regardless of whether it moves in favour or against,’ advises Monte.

Kristia van Heerden, education lead at IG, says her role gives her access to ‘a huge amount of data – a crystal ball into client trading behaviour’ and this data shows being equipped with the right information isn’t enough to ensure trading success.

‘Our emotions get in our way when we trade – I recognise this in my own trading behaviour,’ she says. ‘That means we need to find motivators outside of profit and we need to set up our environment to help us express the emotions that get stirred up in the markets without putting our trading at risk.’

Her advice is to keep a trading journal and diligently make records of the emotions you experience when trading so you can become aware of your patterns and learn to manage them. She also suggests making any riskier trades you want to try in the demo account, not a live account, which can be a way of ‘getting them out of your system’ so you can be disciplined in your live account trades.

Demo accounts are a place to learn good trading habits

‘As humans, we have a tendency to risk it all to avoid a loss while closing positions in profit swiftly on fear the market oscillations could result in it going against,’ says Monte. ‘To conquer this requires practising with a demo account.’

Monte notes that practising when to hold or let go of trades in a demo account develops good habits that can then be applied in live trading. ‘This will make it easier when trading live to get more out of a trade when it goes in favour, and – crucially – minimising losses on those days where it trends against,’ he says. ‘On the demo account, place a trade and practise putting in place time limits that are longer for when the market goes in your favour (say, at least 30 minutes), and very short when it goes against (five minutes).’

You can also set stop and limit orders to automatically help you to protect your profits and guard against loss.

Tips for getting started with live trading

Be realistic
Chris Beauchamp, chief market analyst at IG, says that whether you’re just starting out or you’re more experienced, it’s vital to only put in what you can afford to lose when it comes to trading.

Monte says another important habit to cultivate is not to look for ‘the one’ when you’re trading. ‘It’s wrong to treat every trade as “the one” that’ll generate large returns,’ he says. ‘Trading success usually involves a sum of trades that, on average, have gone more in your favour than those that have gone against you. Use the demo account to open and close trades at the start of your trading day to remind yourself it’s just another trade. You can then switch to a live account and start placing live trades knowing there won’t be a sole trade that’ll guarantee financial freedom, but rather several over a longer period of time.’

Don’t try to trade or invest in everything
‘Too often, people flit from one market to another, looking for the “big move”, or they change strategies regularly,’ says Chris. ‘It’s important to remember, not every day has to have a share deal in it, and it’s OK not to know which way a market is going. Sticking with one or two markets and following a consistent investment strategy for a while instead of chopping and changing is usually a sensible approach.’

He adds that many first-time traders tend to be overly ambitious and don’t exercise enough caution. ‘It’s important to bear in mind how quickly markets can move,’ he says. ‘It’s possible to make big gains, but the crucial risk here is that these gains come with potential for big losses.’

It’s vital to ensure you don’t overleverage (take on too much potential risk when compared to your investment capital).