Practicing Day-Trading Risk-Free With a Simulator

Making a profit through day-trading requires practice as much as it does knowledge. A day-trading simulator—or a "demo account"—might not mimic all the pressures and risks that come with having real money on the line, Still, it can help you learn and hone trading strategies.

Using a day-trading simulator is a way to develop confidence in your trading decisions. You can trade without fearing mistakes. A simulator lets you monitor market conditions and explore different charting tools and indicators. You can become familiar with the steps involved in entering, reviewing, and executing your trades. You can also practice using stop-loss and limit orders as part of your risk-management strategy.

Whether you day-trade the foreign exchange market (forex), stocks, or futures, free demo accounts are available to test out. Each company that offers a simulator uses a different type of software called a "trading platform." Taking the time to explore how each platform works will give you the chance to see which one best suits your trading style.

Futures Demo Account: NinjaTrader

NinjaTrader is a low-cost futures and forex trading platform with upgrade options. To start, you can download the software for free for trade simulation, advanced charting, strategy backtesting, and other features.

The free software lets users simulate live day-trading of futures and currencies at their leisure. There is also an option to download data from prior days so you can practice trading with the market activity from that period.

If you want to use NinjaTrader to conduct actual transactions, the company provides that service through NinjaTrader Brokerage or another brokerage it has partnered with. Commissions are 35 cents per micro contract for users of the free platform.

Paying customers can lease the platform and receive premium Trader + features such as automatic stop-loss and profit-target orders, one cancels the other (OCO) orders, and order entry hotkeys. Those who choose to buy lifetime access to the platform receive Trader + and Order Flow + features, the latter of which includes a market depth map, a volume profile drawing tool, and the ability to chart volume-weighted average prices with standard deviations.

Leasing starts at $60 per month. Purchasing the platform outright costs $1,099 in a single payment or $1,316 in four monthly payments of $329.

Commissions for those who are leasing the platform are 19 cents per micro contract; for those who purchased the platform, they're 9 cents.

Forex Demo Account: OANDA

There are several forex demo account providers to choose from, but for U.S. residents, OANDA offers a lot of flexibility and competitive spreads.

OANDA's demo accounts do not expire, so you can practice for as long as you want. This can be done through OANDA's desktop trading platform, mobile app, or application programming interface.

OANDA does not charge a commission on trades once you begin live trading. Rather, the company makes money by charging a slightly higher bid/ask spread—the difference between the buyer's and the seller's prices—to enter or exit a trade.

The desktop platform includes trade functions such as placing a stop loss and target price at the same time a trade is taken. It also provides advanced charting capabilities.

Stock Demo Account: TradingView

TradingView is a platform that provides free real-time demo trading and is also widely known for its free stock charts. It lets you make simulated trades in stocks and forex. Futures demo trading is available as well, but the data is delayed.

TradingView offers many kinds of charts, including the Renko chart (which shows price movements using rising and falling bricks and has no fixed time scale) and a spread chart (which shows the difference between two stock prices).

TradingView can sync with a limited number of brokers if you decide to trade with real money. If you do not want to use the brokers it offers, you will need to turn to a different platform for live trading.

Frequently Asked Questions (FAQs)

How different is trading on a demo account as opposed to a live account?

If you switch from a demo account to a live account with the same broker, then there won't be any major differences in how you place trades and manage your account. However, there will likely be a major psychological impact when you start risking real money on trades. It can help to reduce your position sizes as you transition out of a demo account into a live one. Once you have a handle on the emotional impact of risking money, then you can scale up your position sizes and take on more risk.

How do I sign up for a demo account?

Signing up for a demo account should be as easy as filling out an online form. Demo accounts shouldn't request the same level of personal information as a live brokerage account. They should only ask for email addresses and that sort of basic information. You should double-check the legitimacy of a demo account that requests banking details or other sensitive information.

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