In their quest to win over customers, many binary options brokers offer a wide range of incentive ranging from high payouts, mouthwatering bonuses, quick withdrawals and demo accounts.
For many people, especially the new trader, a demo account might be puzzling to you, since you are not sure of the value a demo account provides.
Now, if you are just starting on the path of binary options trading, one of the best ways of learning the ropes is through a demo account. This is because a demo account offers you the opportunity of testing your skills on a trading platform without actually staking any money. Binary options being a highly risky endeavor, you might never be able to make a profit without the training offered by a demo account. This article will give you everything you need to know about binary options demo account, what they represent, how to use them, their benefits, and which binary options brokers have them on their platforms.
A binary options demo account is an account which has all the features and functions of a real account but which is funded with virtual currency, instead of real money found in real accounts. The virtual currency can be used to trade on the binary options platform just like you are using real money. With the demo account, you experience firsthand what it’s like to trade binary options, without risking your money.
Ok, to get a clearer picture of the function of a demo account here is a hypothetical example.
You are new to the binary options business, and you hop onto a popular online broker’s site. You register for a demo account that promises virtual currencies worth $10,000. The demo account features the same interface as the real account, and you can see the live trading features such as the underlying assets, types of trade, trading tickets, and market charts.
You selected a currency trade and placed a Call/Put trade on USD/EUR. You choose an expiry time and “Low”, and then you entered the trade. The price bobs up and down, and you watch as the trade is terminated. And you predicted the market behavior correctly. Your winnings reflect in your virtual balance.
Next, you try your hands on a different asset, and you win some and lose others. You might get a losing streak where all your balance might go up in the air. This experience is what the demo account is all about. To taste the volatility of the binary options market without risking your money, without learning the hard way. With the insight gained from trading with your demo account, you can learn what works, and work doesn’t. This knowledge will prove invaluable when you open a real account and start trading with real money.
Due to concerns about users abusing the demo account feature, many binary options brokers place some restrictions on their demo accounts to discourage people from opening only their demo accounts. Even though some brokers offer completely free demo accounts without any restrictions, many restrict their demo account through the following:
The best option is to find a broker that provides a free and unrestricted demo account that you can use for as long as you want.
Some binary options brokers make misleading claims of providing a demo account in their promotions, whereas they are only trying to lure users to their platform. The following cannot be called a demo account:
A demonstration video showing you the features of the platform and how to use it. It is only a video, not an account for testing the platform.
An interactive version of the broker’s trading software that allows you to play around the platform, but which does not provide live trading. It may allow you place some trades to show you how the platform works, but if you refresh the page, it will repeat the same experience.
These are clearly not demo accounts; it is only a ploy by the brokers to increase their search engine ranking with the word “demo”. So you need to be on the lookout for brokers who mislead their users with the promise of demo accounts.
Many other binary options brokers offer demo accounts; you can search for them online.
Irrespective of the binary options broker you choose for your binary trading activities, it is of utmost importance to register with at least one broker that offers demo accounts, especially one offering an unrestricted demo account. To give more credence to the importance of demo accounts to your success at trading binary options, here are some extra points to shed more light on the issue:
1 – It helps you learn how to use the platform and reduce mistakes
While most binary options trading platforms are built with ease of use in mind, a beginner on a new platform can make costly mistakes. How would you feel if you lost money only because of a typo or because you forgot an important step when you were placing the trade? With a demo account, you have ample time to test the platform so you can avoid mistakes when trading live.
2 – Demo testing allows you to perfect your trading strategy
This is one of the most important uses of a demo account. The chances are that you already have a trading method which you have backtested on historical data. Even though backtesting might tell you the success rate of a trading strategy, it is essential to test the strategy in real-time conditions before trading with your money. Demo account allows you to test your trading strategy with real, live market conditions. Skipping this process is a recipe for failure.
3 – Demo testing helps you know if your schedule might affect your trading strategy
Often, strategies which indicated strong results in backtesting might become flops in reality because of your schedule and other factors. With demo testing, you can discover that majority of the trades you planned to place are on during your office hours or while you are asleep. Knowing of this issue during demo testing affords you the time to look for solutions before investing your money and risk losing it. Perhaps, you might be able to solve the problem by trading via a mobile app or selecting different expiry times.
4 – Helps you learn in a low-pressure atmosphere
If you are trading binary options with your money for the first time, watching your money disappear can be quite unnerving for most people. It is important to be composed to avoid making rash decisions. This is why demo testing is essential as it gives you the opportunity of learning for as long as you like.
Going from backtesting to demo testing can be tumultuous for many traders, not to talk of real-life trading. So make sure you are comfortable with the platform, and be realistic. Fund your account with half the money you plan to invest, and then invest the rest after you are well adjusted to the routine.
5 – It helps you troubleshoot any problems that you encounter
A demo account allows professional traders to test their strategies if they stop delivering the right results. Strategies may stop working for different reasons such as fluctuating markets, psychological state of the trader, and other factors that are difficult to establish. With a demo account, you can safely investigate what is wrong without risking your money. And after the issue has been resolved, you can go back to your winning days.
6 – It helps you fine-tune your strategy
When you have learned the nitty-gritty of the trade and you are considered a pro, a demo account allows you to continue improving your craft. It offers you a platform for self-development, testing new strategies, research, and more. With this, you become an even better trader, and this is why the best type of demo accounts are unrestricted.
A demo account provides the testing ground for learning and practising your binary options trading strategies risk-free before staking your real money. If you are ready, why not register with a reputable binary broker who offers demo accounts and start testing the platform. When you start making wins with your virtual currencies, then you are confident you will have successful trades when you invest real money on the platform.
This article may also be interesting: Binary Options – Simple guide for beginners.