Those who switch over to trading the binary options market are usually surprised when they discover that rather than being the norm, binary options demo accounts are actually an exception. Binary options demo accounts are not commonly available and where they are provided, the conditions provided by the brokers to operate them are usually not too tolerable.
Unfortunately, the situation has not improved so much in the last few years. Many brokers are still not giving their traders access to binary options demo accounts. This robs traders of the chance they need to actually study the market for what it is and to profit from it.
The binary options market is based on prediction of asset behaviour and asset direction, and all this must be done within a set time. This makes binary options a bit more challenging as it takes more than just a correct prediction to make money. Traders need to be aware of this and this makes getting a binary options demo account an important part of the learning process.
Fortunately, we have been able to find brokers that will provide binary options demo accounts to their traders. The list is published in the concluding section of this piece. But the big question is: what purposes can a binary options demo account serve a trader?
What Can You Do With a Binary Options Demo?
It is not just enough to clamour for your broker to provide you with a binary options demo account. You have to know what to do with it and how to get the best out of it. If a binary options demo account is not improving your trading, then it is of no use.
However, I can tell you here and now that binary options demo accounts are indeed useful tools to help you improve your trading. Here are some ideas on how best to use your binary options demo platforms.
a) Practicing the Trade Process
One of the things that you can do with a binary options demo platform is to practice the binary options trade process. How do you call or put a trade option? How do you buy or sell an option (for American-style binary options)? How do you select financial assets to trade? How do binary robots work? How do you switch between asset classes when you want to trade? These are all examples of things that you will encounter in the trade process and you need to know how all this is done. It may look pretty easy, but it is not. This is where the binary options demo comes in.
For instance, you may want to trade a Call/Put option on the GBPUSD. But at the last minute, you decide a One Touch option would better deliver your trade objectives. You may already have selected the GBPUSD chart. However, most platforms list the EURUSD before the GBPUSD in their asset listing section. The moment you switch from the Call/Put to the One Touch trade option (or any other one for that matter), your financial asset selection will be reset by the platform. You may just go ahead to click away on the trade processes, only to realize that you did not trade the GBPUSD but the EURUSD! Many traders have made this mistake and there must be a few of you reading this who have as well. These are some of the errors that practicing on a binary options demo will help you avoid.
Practicing the trade process on a binary options demo platform will produce perfection in executing trades. This will enable you avoid the most basic mistakes when setting up your trading choices.
Let’s face it. How likely are you to fly an aircraft where the pilot has had no simulator training to prepare him or her for sudden, unexpected situations in the air? Not likely. It is the same thing with binary options. Demo trading prepares you for any surprises in the trade process.
b) Developing Personal Strategies
Binary options strategies are an essential ingredient of profitability in the binary options market. A binary options demo account can be used to develop and optimize trading strategies. It is very simple to understand. You need to know how your manual or automated strategy will hold up when subjected to real market conditions.
c) Developing a Signals/Copy Trading Service
Those who want to commercialize their knowledge of the markets by providing trading signals or by using signals generated by their own binary robots will need a demo account to test the efficacy of their service. The results obtained can also be used to optimize their automated signals software. These services usually function with a backend software where the signals are generated and then fed to the front end, which is where it is delivered to subscribers. If you offer this service or are interested in offering this service, then you need a binary options demo for this.
Binary Options Demo Accounts: Formats
What are the formats of demo accounts that are presented by binary options brokers? We basically have two formats:
- Free and unlimited binary options demo accounts
- Limited demo accounts
The free and unlimited binary options demo accounts bear the following characteristics:
- They are non-obligatory, i.e., they do not require the trader to first open and fund a live trading account.
- They can be used for an unlimited amount of time.
- They are free.
These free and unlimited accounts are mostly provided by brokerage companies which operate with a proprietary platform.
In contrast, limited demo accounts have the following characteristics:
- They require the trader to first open and fund a live trading account.
- They can only be used for a few weeks before they are shut down.
They are mostly seen with brokers operating with turnkey, commercial platforms.
Binary Options Demo Accounts: Best Practices
There are best practices to adopt when doing your binary options demo trading. Here are some of them.
- Always try to use the same conditions as when you are trading real money.
Your practice account should be a mirror image of your real money account. It should be a 100% simulation of the situations you encounter when trading real money. For instance, if you will be starting your real account with $2,000, ensure your demo platform starts off with $2,000 in virtual money. Using $100,000 in a virtual account when you will be trading with much less will give you a false sense of security in your demo trading results and will not prepare you for the real thing.
- Be as serious as you will be with real money trading
Create the same atmosphere you would create if trading a real account. It is amazing how people would like to trade without distraction when trading real money, but think they can demo trade while lying in bed with the TV blasting out music tunes. Such environments are not conducive for trading practice.
- Graduate from Binary Options Demo to a No-Deposit Bonus Account
It is a well-understood fact among industry experts that trading on binary options demo alone is not enough preparation for the vigours of real money trading. Therefore, a graduation should be made from a demo account to a no-deposit trading account which provides opportunities to trade real money without depositing your own money in a trader account. If you have no access to a no-deposit account, you can open a trader account with low deposit brokers. Whether you decide to use your own money to open a trader account with low deposit brokers, or you decide to go the route of no-deposit bonus trading, stepping up from demo to a real money account with as little risk as possible is a natural progression that every trader should undertake.
- Start with Minimum Trades and Step Up
It is best practice to start with the minimum trade amount and then step up as your proficiency improves. This is one of the techniques that is used by great traders all over the world to master the concept of money management as it concerns binary options.
- Pay Attention to Money Management
Many brokers have a minimum trade amount below which traders cannot buy contracts on prediction options. If you are starting with an account of $500 or less, this can be a genuine problem. You should never invest more than 3% of your account in open trades. So if you find out that using a small real money account will put you under too much risk exposure, hold off on trading until you are able to fund the account adequately. Money management, not a good trading strategy, is what ensures longevity and insurance against a losing streak.
Q: Do binary brokers offer demo accounts?
Answer: Very few actually. Most binary options broker instead opt not to offer demo accounts, instead they will require a fairly low starting deposit. It is usually around the $200 mark but some even offer a $10 starting deposit.
Q: Are the demo accounts limited to a set time?
Answer: It depends on the broker, some will offer you an unlimited demo account to use for as long as you like. Others want to convert you to become a real trader with a live account so they will set a time limit or place a limited amount of virtual funds into your demo account in order to push you to trade for real.
Q: Do demo accounts come with limited functionality?
Answer: No. Generally speaking you can have all the same functionality you would get with a real account. This includes chart features, trading sentiment bars and the full list of symbols to trade. You may not be able to access the full range of educational tools on offer and if the broker offers trading signals, you will probably not receive these either until you have upgraded to a real account.