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Spread Betting Demo Accounts

Written By

Jemma Grist

Written By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

» Jemma Grist Profile Page

Edited By

Tobias Robinson

Edited By

Tobias Robinson

Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.

» Tobias Robinson Profile Page

Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

» William Berg Profile Page

Updated

Jul 24, 2024

Many online brokerages offer new investors a demonstration, or ‘demo’, account to trial both their software service, and to allow you the investor to test and train your trading prowess. Here we look at why this is good practice, and provide a list of the best spread betting demo accounts.

Spread betting is an efficient way of taking a position, making a bet on a wide variety of assets, such as shares, indices, commodities, forex, composite funds.

It is efficient because, firstly, as you are not buying and selling the asset you can usually avoid the tax triggered by acquisition and disposal of assets (i.e., Stamp Duty and Capital Gains Tax). Read more about tax implications here.

Secondly, it is an efficient use of funds because you don’t have to buy the underlying asset (share, currency, and so on) thus your money can be used to cover bigger bets – this is called leverage.

The spread in spread betting means the difference between the broker’s buy and sell price, there is no commission to pay on a spread bet as the broker’s costs are built into the spread.

In order to understand how anyone thinking of entering this market can benefit from the best spread betting demo accounts, we need to look at leverage as it is the supercharger in the trading process, it magnifies your gains but also your losses.

Leverage And Risk

Leverage means that you only need to front up a small percentage of the asset value to take a position. The amount you put up is your equity (or margin).

While this gives you more bang for your buck it also exposes you to greater risk, as a few points change in the price of the underlying asset can wipe out your stake.

For example, if you have £1,000 on your account and maximum leverage granted by the broker/platform of 10:1 then you can take a position with an asset value of up to £10,000.

If the price moves against your bet your margin could be wiped out, however, brokers will offer a stop-loss limit, so that your position is closed at a pre-set level if the market moves against you.

Practise

We can see that leverage increases the size of the bet you can make, and thus the amount of profit, but it also increases your risk.

Most spread betting platforms are duty bound to report that between 65% and 75% of retail investors (out of an estimated total of 100,000 UK traders) lost money on spread betting.

Spread Betting Demo Accounts

In practice, it is tricky to track price changes and calls upon your margin, so it is vital to be familiar with the tools offered by the different brokers, how these are presented, their sensitivity, and how they work together.

The demo account should exactly imitate the live spread betting platform. This is crucial not only in order to familiarise yourself with a particular platform but also in helping you select the platform which best suits you. You are training in the demo, and like anything, practice will make perfect.

The best spread betting demo accounts are the ones that give you the information and tools to help you to make fast decisions and execute them in a simple and clear way.

Charts

Typically, the brokers will use a Candlestick chart to show price movements over the time period you select. Each day’s prices are represented by an icon that looks like a candle with a wick at both ends (appropriate for day traders).

The candle part represents the price movement during exchange trading hours, the wicks track any up or down price movement in after-hours trading. This chart is usually the central part of the screen and takes up the largest area.

The key tools are the size, stop, and limit settings that you can use to govern the position which you decide to take.

‘Size’ is simply the amount you want to trade; the ‘stop’ is your limit on losses for that trade, and the ‘limit’ setting enables you to set when you want to take your profits.

Data, Market Sentiment, Discussion Groups

All of these sources of information play a part in influencing Wall Street and City professionals, so a good spread betting demo account will have a Twitter feed somewhere on your dashboard.

Bloomberg, Reuters, CNBC, AP and a few mavericks will often feature. You will have to research outside the demo when you have a particular asset focus. There are many sources of good and not so good data, and no-one knows what will actually happen.

Learn

The most useful exercise a potential spread betting investor can undertake is to play in a demo account to test spread betting skill and stamina.

Taking a position is different from reading a headline and thinking, for example, gold might rise or fall over the next week.

You have to risk your virtual money. Going through the process of typing in the amount and then pressing the ‘place deal’ button gives your choices an intense focus. Whether it is a demo or not you, and your skin, are in the game.

Trading Psychology

Most spread betting will come from the gut and depend on your nerve. A demo account used properly may give you an edge over your competition.

Using the best spread betting demo accounts means you are able to test the amount you want to invest in assets as any losses you incur will only be of the virtual money the platform allocates to you when you open the account.

You will learn the best times to trade which assets. You will see which types of announcement affects asset prices and how. All of these are useful but the crucial benefit a spread betting demo account gives you is an arena in which to test your nerve.

Very quickly a user becomes possessive over even their virtual funds, we don’t want to lose so we pay close attention. We will be bruised, beaten, and disheartened at times, and this will help us reach that top quartile of all spread betting investors – the ones who make money.