Sometimes it can be daunting to start trading Contracts for Difference or to start spread betting.  The very attraction of these forms of share trading, the great gains that can be built up from small movements, also means that the losses can mount up quite quickly.

However a demo account is a very good way of learning the ropes.  There are things that should be watched for, and it should be recognised that a demo account is not the same thing as trading with your own money.

A demo, or shadow, account is a “play” account where a person can put in the trades that they think should be made and then system mirrors a real system.  Essentially the system will buy and sell at the currently prevailing prices and will show reports to see if the trades would have been profitable or made a loss.  This will give a new trader some idea of where their strengths and weaknesses lie.

It must be recognised that there is a difference when you use your own money and when you use a demo account.  When it is your own money then emotions can cloud your judgement.  Benjamin Graham, the great investment theorist who Warren Buffet claimed to have copied, said that it was not the system that was used that marked out successful investors but the discipline that the successful investors used to keep to a system rather than their emotions.

It is much easier to use a system when it is not your money.

Last Updated: June 14th, 2010