Practice Trading Binary Options With A Demo Account
Here is the Skinny on Binary Options Demo Accounts
When you are checking out binary options brokers, you will notice that there are a number of different features and benefits that these websites try to promote as important. They stress their bonuses, their trade alerts, and their fast withdrawals.
Some of them might also mention that they offer demo accounts. If you see this offer enough times, you probably will start wondering what demo accounts are and what makes them such a valuable offer.
In truth, a demo account is one of the most valuable tools that any binary options website can offer you. This is because demo testing is an absolutely indispensable stage in your journey if you wish to become profitable with your trading. But in order to test, you need a demo account. Without one, you cannot complete this crucial step, and you are unlikely to become profitable.
In this article, I will tell you everything that you need to know about binary options demo accounts: what they are, how they work, which brokers offer them, and how they can benefit you.
What is a Binary Options Demo Account?
A binary options demo account is just like a real account, except that instead of being funded with real money, it is loaded up with virtual currency. This is fake money with no real-world value.
On the demo account, you can “trade” just like you could on a real account. The demo platform works the exact same way as the real one, so you can take the same actions you would if you were really trading. All the data you see displayed is in real-time. It is the same data being displayed on the real platform at that very moment.
This gives you a safe environment in which to test your trading methods and explore the platform. You are getting the same exact experience you would with real trading, minus the risk. This allows you to practice trading without losing real money.
How a Binary Options Demo Account Works
To get a better understanding of the benefits of demo testing, allow me to provide a brief example.
Imagine that you open a demo account, and your binary options broker provides you with $10,000 of virtual currency for your demo testing. When you open the demo platform, you will see this balance listed. You will also see the same display that you would if you were trading live with real money—the assets, the different types of trades, the charts, and the trading tickets.
You decide to place a High/Low trade on GBP/JPY. You select that asset, you choose an expiry time, and you go ahead and enter the trade after choosing “High.” You watch as price moves up and down and the minutes tick down till the trade expires. And to your delight, you win. You now see your winnings added to your virtual balance. You are feeling pretty great.
You win your next trade as well, and your next—and then you lose. You win and lose a couple more, and then you lose again … and again … and again. Suddenly things are not going so well. You are in the middle of a losing streak, and you have no idea why. Your balance continues to drop as you scramble to understand what is going on.
One thing you do know at this point though, and that is that you are very glad that you are not losing real money. Even the sight of your virtual balance dropping off a cliff is enough to send your heart racing.
This is exactly why demo testing is so important. A situation like this is a learning experience, but at least this way you have a chance to do so without busting your bankroll. This allows you to gain positive insights without going broke.
Indeed, in our example, perhaps you take a few days off and come back to your demo account later with a refreshed mindset. Maybe you figure out the mistake you were making and you get back on track. Your virtual balance starts going up again. You begin winning more consistently, and now you know you have a shot at winning on the real platform with real money.
Binary Options Demo Account Restrictions and Limitations
Not all binary options broker demo accounts are equal. While a demo account is always the same in essence in terms of functionality and how it works, many brokers restrict their accounts. They do this because they do not want everyone on the planet signing up just to use their demo accounts while ignoring their real trading platforms.
Binary options demo accounts may be restricted in any of the following ways:
- Time-based. You may only be able to use the demo account for a few days or weeks.
- Deposit-based. You might only have access to the demo account if you deposit a certain amount of money.
Some binary options brokers do offer free and unrestricted demo accounts which you can use forever. Obviously if you can find this, this is the best case scenario!
What a Binary Options Demo Account is Not
Few things are as irritating as when binary options brokers claim they offer a “demo,” but they do not really do so. You go to the “demo” page, and you find one of two things:
- A demo video which shows you what the platform is like and how it works. This is a “demo” in the sense of a demonstration, not a practice account.
- An interactive version of the platform which you can play with, but which does not operate based on real-time data. Usually you can place one or several fake trades to see how the platform works. But this is not a “live” version of the product. If you refresh and try again, you will have the same experience.
Do not be fooled by these slightly misleading “demo” offers. These brokers want the word “demo” on their site because it helps them rank in search results, and because they know that inexperienced traders who are not looking too closely may just see the word and think, “Cool! This broker offers a demo!”
But as a savvy trader, you need to pay more attention than that, and make sure you are joining a site with a real broker demo account.
Brokers Offering a Binary Options Demo Account
Here are a few of our recommended binary options brokers which offer demo accounts to traders:
- Finrally: A demo account is available at all account levels. No restrictions are mentioned on the site.
- MarketsWorld: This is one of the few binary options brokers which offers a demo account without any restrictions. Use it as long as you need it.
- Nadex: Nadex is another awesome exchange which gives you access to a demo account which you can use indefinitely.
This is not a full list of all binary options brokers offering demo accounts—just those that we have vetted and recommend for all of their features.
6 Reasons You Need to Demo Test Before You Trade Live
No matter what binary options broker you decide you want to use to conduct most of your trading, I highly recommend that you sign up with at least one broker which also allows you the use of a demo account. Preferably you should choose one which allows you to use the demo account without limitations.
Hopefully by now just from reading through my example, you already understand just how important demo testing is. But let’s go over the reasons in more depth, including a few I have not discussed yet.
You will learn how to use the platform, preventing mistakes.
Binary options trading platforms are generally designed to be extremely easy to use. Still, it is possible to make mistakes if you are unfamiliar with a particular platform. The last thing you want is to lose money simply because you mistyped or mis-clicked or forgot some crucial step while placing a trade. If you demo test first, you will learn the ropes without losing money.
Demo testing allows you to find out if your trading methods really work.
This is probably the most important thing you can get from demo testing. If you are thinking about trading binary options live, hopefully you already have a trading strategy, one which you have tested on historical data (this is a process referred to as “backtesting”).
While successful backtesting gives you a strong indication that a given method will work, you still need to demonstrate that success is possible in real-time before you trade live with it. Demo testing allows you to do just that. You can find out if your strategies work with real, current market conditions. If you skip this step and go live with real money, you really are just guessing!
With demo testing, you can see whether real life is going to get in your way.
Sometimes a strategy which works great in backtesting does not translate into real-time all that well because of scheduling conflicts and other logistical issues. Demo testing might teach you for example that most of the trades you want to place are overnight or happen while you are at your workplace
If you learn this lesson during demo, you can also search for a solution, all without risking or losing real money. You might find for example that choosing different expiry times or taking advantage of your broker’s mobile trading apps helps you get around scheduling conflicts.
You can learn in a low-pressure situation.
The first time you risk real money with binary options trading, you probably will be surprised by just how much this tests your emotions. Keeping a cool head is very important if you want to keep your judgment unclouded. For that reason, you should take as many baby steps as you can before you risk your hard-earned cash.
A lot of traders get nervous just switching from backtesting to demo testing. So get used to doing that first, and then fund your account with half the money you intend to trade. Once you psychologically adjust, you can fund your account completely.
You can troubleshoot problems when they crop up.
A binary trading demo account isn’t just for beginners. Even advanced traders demo test regularly. There are going to be times when your methods stop working the way you expect them to. This could be because of mistakes you are making, changing market conditions, psychological factors, or other reasons that are harder to pinpoint.
Regardless, a binary demo account allows you to figure out what is going on without losing more money along the way. Once you identify the issue, you can fix it, and get back to trading profitably.
You can keep refining your methods.
Finally, when you become a professional trader, you commit to your own continuing education. That includes plenty of ongoing research and development. With your binary options demo account, you can continue to test improvements to your methods and new strategies. This will allow you to become an even better trader as time goes on. This is why a demo account which isn’t time-restricted is best.
Conclusion: A Free Demo Account is Essential For Binary Trading Success
If you want to become a profitable binary options trader, then you need a way to practice your trading in real-time before you start putting real money on the line. With a free demo account from one of the top binary options brokers, you can do just that. So check out some of the binary trading brokers I have recommended, and get started with your demo testing. Before long, you will hopefully find yourself profitable trading with virtual currency. You will then know you are ready to win big with real money!