Simulated trading also known as demo or paper trading is a method of experiencing the trading procedure without risking actual money. The process is carried out on a market simulator program which mimics actual market forces and order executions. Some times these programs are the actual trading programs that only mimics the order placing and execution process.
Now simulated trading is available for almost all types of financial instruments including stocks, market indices, forex currencies, Exchange Traded Funds (ETFs), Contract of Differences (CFDs), options, futures commodities, mutual funds, and more. Apart from just avoiding the risks involved in trading, these demo trading systems help traders in many ways to improve their trading skill. Below are some benefits of simulated trading systems.
Knowing How the System Work: The first and foremost reason why should be starting your trading career by demo trading is to know how the market works. Simulation systems give you very good idea about price changes, quotes, buy and sell orders and order execution. Sophisticated systems also keep track of your brokerage fees and/or margin costs of the trades. And so at the end of the session you can easily measure your performance by just measuring your profit or loss.
Better than Books and Papers: Just image how just a red or green arrow mark or color save time, effort and cost needed to realize the price change of an instrument. Trading systems are loaded with more stuff like those. So just a single session on a trading system can help you can learning a whole lot of things which can take days using a book or tutorial. And also you are realizing the actual market conditions which is far better than you imagination; we tend to create perfect a world with our imagination!
Learning Terminologies, Patters and Indicators: Knowing the patterns and indicators is different to using them for trading. Most often you will not get any text book scenarios on real-life trading. You…