You have studied the theory. You understand candlesticks, support and resistance, and basic risk management. Now it is time to place your first trade — on a demo account. This lesson walks you through the entire process step by step so there are no surprises when you press that button.
Concept: Setting Up Your Demo Account
Most FCA-regulated brokers offer free demo accounts that simulate real market conditions with virtual money. Sign up with a broker like IG, CMC Markets, or Pepperstone. The process usually takes a few minutes — you need an email address and a password, nothing more.
Once registered, download the trading platform. Most brokers offer a web-based platform, a desktop application, and a mobile app. For learning, use the desktop or web version — the larger screen makes it much easier to read charts and manage orders.
Step by Step: Placing Your First Trade
Step 1: Choose Your Market
Start with something familiar and liquid. The FTSE 100 index, GBP/USD forex pair, or a large company like Apple or Tesla are good starting points. Avoid exotic markets, penny stocks, or highly volatile cryptocurrencies for your first trade.
Step 2: Analyse the Chart
Open the chart for your chosen market. Set it to a 1-hour or 4-hour timeframe. Identify the current trend — is price making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend)? Note any obvious support and resistance levels.
Step 3: Decide Direction and Entry
Based on your analysis, decide whether you want to buy (go long) or sell (go short). If the trend is up and price has pulled back to a support level, a buy might make sense. If the trend is down and price has rallied to resistance, a sell could work.
Step 4: Set Your Stop Loss
Before you enter, decide where you are wrong. Place a stop loss at a level that invalidates your trade idea — below support for a long trade, above resistance for a short. A common starting point is risking no more than 1% of your demo account on a single trade.
Step 5: Set Your Take Profit
Set a take profit target at the next significant level — previous resistance for a long, previous support for a short. Aim for at least a 1:2 risk-to-reward ratio. If you are risking 20 points, target at least 40 points of profit.
Example: A Simple FTSE 100 Trade
The FTSE 100 is in an uptrend on the 4-hour chart. Price has pulled back to the 7,500 support level and formed a bullish engulfing candle. You decide to buy at 7,510 with a stop loss at 7,480 (30 points risk) and a take profit at 7,570 (60 points reward). That gives you a 1:2 risk-to-reward ratio.
On a demo account with £10,000, risking 1% means you can risk £100 on this trade. With a 30-point stop, your position size is £3.33 per point (£100 divided by 30). Enter the trade, set the stop and target, and walk away. Let the market do its thing.
After You Place the Trade
Do not stare at the screen. Watching every tick will make you emotional and tempted to close early or move your stop. You have a plan — let it play out. Check back periodically, but resist the urge to interfere unless your original reasoning has genuinely changed.
Whether you win or lose, record the trade in your journal. Write down what you saw, why you entered, what happened, and what you learned. This is the real value of demo trading — building habits and collecting data about your decision-making.
Warning: Treat Demo Money Like Real Money
The biggest mistake people make on demo accounts is treating the money as meaningless. If you would not risk £5,000 on a single trade with real money, do not do it on demo. Build the right habits from day one. Your demo performance should be something you could realistically replicate with a live account.