High frequency trading (HFT) remains a highly contentious concept, as it uses complex computer algorithms to trade stocks in high volumes. It is diametrically opposed to standard trading methods which rely on human instinct emotion, and as a result it has earned considerable notoriety and criticism in the financial marketplace.
The popularity of HFT is something that is considered to have a negative impact on the financial market, primarily because it increases the level of volatility that exists for traders. When you consider that markets such as the foreign exchange are already fraught with risk and uncertainty, it is clear that investors must take practical steps to safeguard their financial interests.
The Benefits of Using a Demo Trading Account
One of the first things that you can do as a speculative investor is to demo trade. This option is available through most online trading platforms, and it offers considerable advantages to users regardless of their experience and skill set. Consider the following: –
- Trade in a Risk Free Environment: If you operate through a demo trading account, on of the main benefits is that you get to operate in a risk free and simulated market environment. Essentially, the account affords users access to a real time market, in which they can place trades and execute orders according to their chosen strategy. Despite this, they do not need to commit their own capital, as they use virtual currency to conduct their daily affairs. This is crucial if you are a novice trader, as it allows you to alter your strategy according to the demands of the market.
- Learn how to Use your Online Interface: If you are to succeed as an online trader, you will need to become familiar with the interface of your chosen platform. You can organise your interface to include a host of different technical indicators and analytical tools, each of which provides critical information in your quest to trade profitably. By using a demo account you can experiment with the layout of your display, and create a personalised screen that allows to make fast and efficient trades. The benefits of this are obvious, especially if you rely on the use of charts and graphics to view relevant data.
- Create a Profitable and Purposeful Portfolio: Another key to successful trading is the depth and variety that exists within your portfolio, as this will ensure that you operate profitably regardless of the prevailing market condition. As the majority of demo accounts offer access to a host of financial products and derivatives, you can tailor your portfolio and optimise your chances of success without risking any hard earned capital. Given the range of financial instruments that are accessible through contemporary online platforms, it is important to create a portfolio which suits both the market and your wider investment philosophy.