What is a Trading Simulator? (Demo Platform)

Most traders believe that two things are needed to make money in this market:
1. A Trading accounts and 2. Ability to analyse the market... These are indeed very important, but...

What is a Trading Simulator? (Demo Platform)

Most traders believe that two things are needed to make money in this market:

  1. A Trading accounts
  2. Ability to analyse the market

These are indeed very important, but if we really want to find success, these are not enough. You do need sound theoretical training but, something more important is practical training. The next question would probably be where do we start? How can we check our strategies before investing real capital? Practice is the key to success and in the following article we aim to take you through one of your most formidable allays: trading simulators.

What is a trading simulator?

A trading simulator is a software that simulates real market conditions. This is a tool which allows the user to operate with virtual money in the markets without risking real capital, using this you can practice different winning strategies and gradually learn from your successes, and also mistakes.

The vast majority of stock market simulators offer a virtual balance of $5,000 to $100,000 (euros) with which we can operate using different financial tools: currencies, bonds, stocks, raw materials, indices, CFD, etc. It also allows you to open positions in different markets, such as the United States, Asia and even Europe.

The simulator offers an authentic image of real market conditions but only with virtual money. This is an extremely useful tool because it allows us to test our strategies and also see how spreads are loaded or in turn understand key concepts such as stop loss or take profit.

Most important features:

  • Live simulation and market updates
  • Trading with a demo account without risk
  • Inclusion of all features and functions
  • Ability to test any trading strategy

Trading simulators according to the financial asset:

  • Binary trading simulator
  • Stock market simulator (stock market)
  • Forex simulator

Trading simulators according to the medium used:

  • PC trading simulator
  • iPhone trading simulator
  • iPad trading simulation
  • MAC trading simulation
  • Android trading simulation

Due to a wide variety of options, let’s focus on the general types of trading simulators…

Trading simulator vs simulation platforms

When we engage in trading it is easy to confuse demo accounts, which are simulators within a trading platform, with pure simulation platforms. Although they have similar characteristics, they also have their differences. Here the two main differences:

  • Demo accounts are offered by brokers for free so that traders can learn to manage their trading platform and can practice and analyse strategies. Of course, if the strategy is successful in the demo account, this does not guarantee that the trading activity will have the same outcome in a real account, since market conditions are always changing.
  • A trading simulator is an independent application or website that simulates the experience of other traders. The goal here is for the user to learn from others as the different levels of traders take on different challenges.

Stock market simulator

Advantages and disadvantages:

Among the advantages, we can find the following:

  • If a strategy fails in a demo account, you have not lost anything.in virtual currencies trading stock markets. But if it works, the strategy can used easily in real trading.
  • A real-time stock market simulator allows you to better understand the financial markets and the instruments in which you want to invest.

However the main disadvantage of using a Forex simulator is that it will not be able to replace the real experience, as when we operate with real money our emotions and way of acting/thinking are different. These are some of the factors that establish the differences between a simulation and reality:

  • Taxation of the country where we operate
  • Risk tolerance and trader profile
  • The initial capital
  • The stress of risking real money
  • Risk management and money management strategies
  • The investment horizon

These situations lead traders, especially newbies, to make different decisions than they would if they were operating with a demo account. Keep in mind simulators or demo accounts should only be used to test investment strategies and new instruments. The MetaTrader platform by LVMexchange.com is considered as one of the best stock market simulators available. It is the most used and popular in the world of trading, since it manages a large community and also is houses the most advanced functionalities for online Forex and CFD trading, therefore it is considered as the best option for those who want to start as a trader.

For more information on the simulators using the LVMexchange MetaTrader platform visit our bespoke Trading Platform.