Demo accounts: what they teach and where they lie

A demo account is a practice account funded with imaginary money. It uses live prices from the same feed as a live account. The platform shows the same charts, the same order tickets and the same pip calculations. When you open a demo, you choose a starting balance. That balance is not real. You can reset it whenever you like. The word demo comes from demonstration. It demonstrates how the platform works.

The arithmetic on a demo is honest. On AUD/USD around 0.6640, one pip on one standard lot is 10 units of the quote currency. The quote currency is USD. At 0.6640, 10 USD divided by 0.6640 is about A$15.06. That figure is the same on a demo and on a live account. The platform does not change the pip value because the money is imaginary. You can check the pip value on a demo as often as you like.

A broker may round the pip value. It may quote a spread on top of the raw price. It may also fill at a different price in fast conditions. These details vary between brokers. A demo shows you the broker's own platform. It does not show you how that broker fills live orders. Use the demo to learn where the pip value appears on the screen. Then use a live account to see how the broker behaves when the market moves quickly.

A demo cannot teach fills in a fast market. On a demo, orders often fill at the exact price shown. That happens because the order is not sent to the market. On a live account, a fast market can fill an order several pips away. A requote can appear instead of a fill. A requote is a new price offered after you asked for a different one. The demo never shows you that. It shows you a clean fill at the price you clicked.

A demo cannot teach how losing real money feels. Imaginary money does not cause worry. Real money does. When a live trade moves against you, you may close it early or move your stop. Those actions change your result. A demo cannot show you how you will act under that pressure. The lesson is not about the arithmetic. It is about your own reaction. No practice account can teach that reaction.

Many people treat a demo as proof that a strategy works. That is the wrong use. A demo can show that you can place an order and read a pip value. It cannot show that a strategy will make money live. The fills are different. Your behaviour is different. Use the demo to learn the platform and to check the arithmetic. Do not use it to judge a result.

When you open a demo, the platform shows a balance, an equity figure and a margin figure. Balance is the imaginary money you started with, plus or minus closed trades. Equity is balance plus or minus open trades. Margin is the money set aside for open positions. These three numbers move as prices move. On a demo, they move exactly as they would on a live account at the same prices.

The order ticket shows the instrument, the size in lots, the stop loss and the take profit. The size is measured in lots. One standard lot is 100,000 units of the base currency. The base currency in AUD/USD is AUD. A mini lot is 0.10 of a standard lot. A micro lot is 0.01. The pip value changes with the lot size. On AUD/USD at 0.6640, one pip on 0.10 lots is about A$1.51. That is one tenth of the standard lot figure.

The platform also shows the spread. The spread is the difference between the buy price and the sell price. On a demo, the spread may be fixed or it may move with the market. A broker may widen the spread in fast conditions. That widening affects the price you get. You can watch the spread on a demo, but you cannot feel the effect of a wider spread on real money. The demo shows the number. The live account shows the cost.