Your First Trade on a Demo Account

What you need before you start

A demo account is a practice account funded with virtual money. Prices come from the live market, but nothing you win or lose is real. It is the right place to learn how to open a trade, how orders behave and how your account reacts, before any real money is involved.

You need:

• A demo account on a trading platform such as MT4 or MT5. If you use an Exness demo, the setup is covered on Demo account, MT4 demo account and MT5 demo account.
• The platform open on desktop, web or phone. See Platforms and apps.
• A written plan for this trade: what you trade, why, where you exit if wrong and where you exit if right.
• A journal, which can be a notebook or a spreadsheet.

Treat the virtual balance as if it were your own money. If you trade it carelessly, the demo teaches you careless habits.

Step: pick an instrument

For a first demo trade, choose a liquid currency pair. A currency pair is a price of one currency in terms of another, for example EUR/USD. See Currency pairs.

Before choosing, check:

• Spread: the gap between the bid (sell) price and the ask (buy) price. It is a cost you pay on entry. See What is spread.
• Session: spreads and movement change through the day. See Trading sessions.
• Volatility: how far price tends to move. Instruments such as XAUUSD or NAS100 move faster than major pairs and need wider stops. See Volatility.

Stick with a single instrument for your early demo trades so you learn how it moves.

Step: choose direction and the stop level

You can go long (buy, expecting the price to rise) or go short (sell, expecting it to fall). See Long and short. This page does not suggest a direction. Use your own plan, for example from Technical analysis.

Set the stop loss before you think about size. A stop loss is an order that closes the trade at a set price if the market moves against you. Place it where your trade idea is proven wrong, such as beyond a recent swing low for a long trade. Do not pick it based on how much you want to lose. See Stop loss.

Measure the stop distance in pips. A pip is the standard unit of price movement for a pair. See What is a pip.

Step: calculate position size from risk

Position size is measured in lots. A lot is a standard trade volume. See What is a lot and Lot sizes.

Do not guess the lot size. Enter your inputs into the calculator:

Inputs to enter:

The calculator returns the lot size. Round it down to the volume step the platform allows. Rounding up means risking more than you planned.

Step: set the target

A take profit is an order that closes the trade at a set price in your favour. See Take profit. Place it at a level your analysis supports, such as before a nearby resistance for a long trade.

Compare the target distance with the stop distance. If the possible gain is small next to the possible loss, the trade needs a very high hit rate to make sense. Write both distances in your plan before you enter.

Step: place the order

In MetaTrader, open a new order window for your symbol. The general fields are:

• Symbol: the instrument you chose.
• Type: a market order fills at the current price. See Market orders. A pending order, such as a limit order or a stop order, fills only if price reaches your level. See Limit orders and Stop orders.
• Volume: the lot size from the calculator.
• Stop Loss and Take Profit: your planned prices.
• Buy or Sell: the direction from your plan.

After the order fills, open the trade list and check that the volume, stop and target match your plan. A missing stop is the most common beginner error.

Step: monitor the trade

While the trade is open, watch these figures in the platform:

• Balance: the account value without open trades.
• Equity: the balance plus or minus the floating result. See Equity vs balance.
• Margin: funds set aside to keep the position open. See What is margin.
• Free margin and margin level: how much room the account has before a margin call or stop-out. See Free margin and Margin level.

Do not move the stop further away to avoid a loss. Moving it closer to lock in a result is a separate decision, such as using a trailing stop, and it belongs in your plan.

Step: close the trade

The trade closes when the stop or target is hit, or when you close it by hand. You can also close part of the volume. See Closing trades. If you close early, write down why. Was it a plan rule, or was it nerves?

Step: calculate and journal the result

Enter the closed trade into the calculator to see the result in money and in pips:

Inputs: instrument, direction, lot size, entry price and exit price. Compare the output with what the platform shows. If they differ, look for spread, commission or swap. See Profit and loss.

Record each trade in your journal:

Over many trades, the journal shows whether your plan works and whether you follow it.

Precise definitions for experienced readers

• Position size from risk: money at risk divided by (stop distance in pips multiplied by pip value per lot). Money at risk is balance multiplied by risk per trade. The lot calculator does this for you.
• Pip value: depends on the contract size, the quote currency and your account currency. For pairs where the account currency is not the quote currency, a conversion rate is applied. See Cross rates and Pips, points, pipettes.
• Realised risk vs planned risk: the spread at entry, any commission and slippage on the stop fill all add to the planned loss. See Total trading costs and Commission per lot.
• Swap: a charge or credit for holding a position past the daily rollover. See What is swap.
• Slippage and gaps: stops become market orders when triggered and can fill worse than the set price, especially over news or weekend gaps. See Slippage and Price gaps.
• Execution on demo: demo fills can be cleaner than live fills. Do not assume live results will match. See Demo vs live.

Demo limits and the step to live money

A demo removes the fear of real loss, and that changes how people trade. Leveraged forex and CFD trading can lose money fast, including the full amount deposited. See Why traders lose and Risk management.

Pakistani residents should also know the official position: per the SBP, remitting foreign exchange to overseas forex/margin/CFD platforms is not allowed through any payment channel (FERA s.5(1)). In addition, per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse. Read Law and regulators before thinking about any live account.

Frequent questions

How do I trade on a demo account?

Choose an instrument, set your stop, size the position with the lot calculator, add a target, place the order, monitor it, close it and record the result in a journal.

Is a demo trade the same as a real trade?

Prices come from the market, but no real money moves, and fills can differ from live conditions. Your emotions also differ.

Why set the stop before the lot size?

The stop marks where your idea is wrong. Size is then calculated so that hitting the stop costs only your planned risk.

What risk per trade should I use?

That is your decision and belongs in your plan. Whatever you choose, enter it into the lot calculator rather than guessing a size.

How long should I practise on a forex demo account?

There is no set period. Keep going until your journal shows that you follow your rules consistently. That proves discipline, not future results.

Where can I find more terms explained?

See the Trading glossary and Trading basics.