Although demo trading is one of the best solution and method to learn about online trading, yet it possesses some pros and cons which are enlisted here under:-
a. Learning: Main and key advantage of online trading is to learn.
b. Real Environment: Trading on Demo platform is shown the same way as it is shown in the real trading due to which learning can be made easier for the user / trader.
c. Live Rates: Rates on demo platform are also line which is very helpful for the traders to have line view of the market.
d. Support: Live support is provided even on demo platform available at all the trading times. However, there are some brokers who only give support to the real account holders.
e. Tools: Analytical tools and charts are readily available for the traders even on demo platform. Through these tools, trading has now become easy to understand and operate.
a. Interest: The interest of trading is less as compared to live / real trading due to fake currency / equity given in the virtual account.
b. Less Concentration: As already mentioned that due to fake / virtual equity and no real money, trader normally does not much if the transaction is on the loss. Thus it can be said that traders have less concentration on the open ticket order / transaction.
c. Leads to Depression. Sometime it happens that traders open any order and his transaction goes in loss, this results in depression state for him as he thinks that he don’t know how to trade and every time he pick up any order, its transaction is in loss even in the demo account. He always remained reluctant to open the live account and do live trading due to risk of loss.
d. Risky. Internet is full of material which clearly indicates that trading of stock and currency is too risky. But as Finance basis states that higher the risk, higher will be the return. A trader can either lose whatever he has invested or he can become very rich. In case of demo trading of either stock or currency, risk element always remained there. Although the user does not bother about the loss in order due to virtual money, but still this shows that his real money can be negative like this fake money.
e. Easily Gets Fed Up. Due to fake environment and trading, persons can be easily gets fed up which result in negative interest of a person.
f. Equity / Fake Money Gives is very High. Normally the forex demo account is given with $50k for trading, which is very higher for any person to actually invest in the market. Usually in real world, a person or small investor can only generate 5k to 10k maximum. Thus huge false money reduces the interest of a person.
g. Success in demo does not guarantee in Real: The main point to ponder is that success in demo account does not gives any guarantee that a person will also succeed in his real account and can generate real money. Sometimes a person does very good while trading in demo accounts but in real timing, due to reality in nature, person gets diversified and greed which can result into losses.
Concluding words. Before doing any work or business one must learn the ways and means of that business without knowledge is a guaranteed failure. Thus in order to do online trading either currency trading or stock trading, one must take the demo practice account seriously through which he can learn trading without reading books or taken lectures / classes and can start its own real account with better knowledge and skill.