Advantages of demo trading on a crypto exchange

Let's assume that a novice trader has already developed a specific trading strategy and system. Such a trader is aware of the importance of risk management and money management for success, but they feel it is extremely risky to start experimenting with their own assets on the spot or, God forbid, in the margin market without any prior experience. If the trader lacks significant hands-on experience in trading on an exchange (from six months to a year, at least), the demo market is the best place to put their knowledge and skills to the test.

What is demo trading?

Demo trading is a simulated version of actual trading or a way for traders to practice their skills. With this tool, it is impossible to lose money, there are no risks associated with the deposit, and the trader does not experience any psychological pressure because the outcome will always be favorable. The platform user is free to make as many mistakes as they want; the important thing is to learn from them. If the trades were profitable and generated a virtual profit, it indicates that technical analysis (TA) was carried out “perfectly” and the trading strategy was used appropriately. Therefore, the trader should keep moving in this direction. If the trader's positions were closed at a loss, this is a learning experience and a sign that they need to make changes to their trading strategy and approach.

Demo assets

Assets are bought and sold in real market conditions, but with demo tokens. Each exchange allocates a certain number of test assets to demo accounts (the structure of assets varies depending on the trading platform used), and the trader has the freedom to choose which currency pairs and when to open positions. Demo accounts can only be used in the demo market, so their functionality is severely limited. Such assets are typically not withdrawable or replenishable. They are, in fact, eternal and do not burn out after a certain period – the exchange only provides them for trading on the demo market at a time convenient for the trader, and this is their sole mission.

Demo markets

It is well known that the spot, margin, and futures markets each have their own characteristics, such as a different set of orders and other distinctions. Demo trading is an excellent way to learn about the differences between these markets, as well as the various types of orders and the nuances involved in their creation. The margin and futures demo markets give traders the chance to use leverage to their heart's content in order to determine their own personal best ratio of risk to return and to comprehend the costs associated with using leverage over an extended period of time. Even if the test deposit is completely liquidated, the real assets in the accounts will not be jeopardized because the traders are only risking demo tokens. They will instead gain priceless experience that they won't want to repeat in the real market.

The trader will eventually choose the best trading approach that works in various markets and will feel much more confident. This means a person is ready for real trading, and it's time to put the developed trading system to the test.

Recommendations for trading in the real market following the demo trading

It is worthwhile to begin placing orders on the real market with modest sums, the loss of which won't have a significant impact on the overall deposit. It is best to begin by investing from 5% to 10% of the total balance in the first deals while keeping risk management in mind. Obviously, the profits from such deals won't be impressive, but using such cautious and balanced strategies will help you “get your hands on” real deals, boost your confidence in your skills, and lessen initial psychological pressure. An excellent result will be one that allows you to double your initial deposit. If this is successful, you might think about gradually increasing volumes and the size of the next order.

Advantages and disadvantages of demo trading

Demo trading has the following advantages:

• allows you to familiarize yourself with how various markets operate, their differences and types of risks, and how to react to high market volatility;
• introduces inexperienced traders to a sophisticated tool like leverage. The trader has the potential to make a substantial profit or lose their entire deposit when trading on the margin market with high leverage (10x to 100x). You can become familiar with all the details of margin trading on the demo market without worrying about losing money;
• gives you the chance to test out all the features of the trading platform, including various types of accounts, orders, charts, indicators, as well as reporting, history of trades and transactions;
• enables you to test and improve your trading methods and trading system.

The disadvantages of demo trading are as follows:

• doesn't help a trader's psychological stability develop because the assets used in demo trades are test versions of real assets, so there is no excitement or disappointment associated with winning or losing trades. Therefore, it is quite possible to practice managing a deposit and testing trading strategies here, but it is unlikely to consistently trade in a profit in a challenging market;
• does not help traders maintain their trading discipline. In real trading, every trader must always strictly adhere to the trading plan, whereas in the demo market, many people relax and begin relying solely on intuition, rather than the TA.

What exchanges offer demo trading

Demo trading is available on many cryptocurrency exchanges. Europe’s largest cryptocurrency exchange WhiteBIT will be the best choice for practicing on the demo market for those who intend to routinely enter or withdraw different fiat currencies. Demo BTC and Demo USDT are two unique demo tokens that are available for traders who want to first test their knowledge and skills in demo trading. New users will initially receive 0.5 DBTC and 1000 DUSDT, which is more than enough to test any trading approaches or strategies on the spot market, naturally using the “demo” plugin. 

Demo assets that the user receives from WhiteBIT