A binary option demo account is a great way to gain experience with binary options trading while saving your money until you know the platform and the assets you're trading. Demo accounts allow you to determine the best strategy so you can maximize your earnings.
The best demo accounts give you virtual money, often at least $1000, in exchange for your email address. Their trading simulator allows you to practice trading stocks, futures, cryptocurrency, options, and CFD.
Table of Contents
- 1 The 5 Best Free Binary Option Demo Accounts 2020
- 2 Benefits of Using a Demo Account to Practice Binary Options Trading
- 3 What To Look For In A Binary Trading Demo
- 4 Final Thoughts
The 5 Best Free Binary Option Demo Accounts 2020
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Benefits of Using a Demo Account to Practice Binary Options Trading
Although binary options trading is, at its core, a decision between calling whether the asset will rise or fall by a specific time, it's more complex than that.
A demo account lets you test trading strategies without risking real money as you gain familiarity with the specific trading platform that you're considering. It doesn't matter if you are a beginner looking to practice and learn or a veteran honing your skills and bumping them up to the next level. Demo accounts can also help you practice money management using virtual money.
Some binary options brokers allow you to access your practice account only during the time before you open an official account, while others will let you keep your demo account permanently. For veterans, this is a great way to test-drive future strategies before implementing them with real money.
Gain Familiarity With Trading Platform
Binary trading demo accounts are a great way to try out the different trading platforms that you're considering using. When you drive a car, you want to know where to find your windshield wipers, headlights, gas cap, and other elements you need for safe driving.
A demo account offers you the same opportunity for the dashboard on your new trading platform. You can explore how to locate different charts and tools and see how intuitive it is. If you're a more experienced trader, you'll have something to compare it to, and if not, you'll get a sense of binary options basics.
Knowing ahead of time where to find the tools that you need will ease your trading. Some platforms are more complex than others. You want to know this before you deposit your funds into an account with a specific broker. You may even like a more complex platform, depending on your needs.
The last thing you want is to be trading with real money and not be able to find the controls and options you need. Use a practice account to ensure you avoid those types of problems.
Practice For Beginners
Before you invest with actual money, make sure that you understand the fundamental process, never mind the nuanced parts.
Some key things to understand, especially with a new platform, include:
- How to place a bid
- How to sell
- Where to find the broker's educational materials
- More advanced materials
- How to switch between different chart views
- Which chart view you are most comfortable with
Regardless of what level of a beginner you are, binary options demo accounts are worth spending time on. There's significantly less risk than when you are using your real money, and your bank account doesn't face the consequences of any risky techniques you try.
Test Trading Strategies Without Risking Real Money
Perhaps one of the best parts of opening a demo trading account is that you get unlimited opportunities to evaluate your strategy before actually implementing it with real money.
Practice without the risk allows you to hone and develop your approach. You can experiment as much as you want without investing with actual capital.
The simulated trading with real market conditions enables you to test and retest until you are satisfied with your new strategy. While trading skill is essential, the ability to practice and adapt is even more valuable in the fast-paced, constantly changing world of binary options trading.
Practice Money Management Skills
When you're caught up in the moment of trading and excited about making money, it can be easy to make reckless decisions. Demo accounts allow you an opportunity to practice money management skills and curb this behavior.
Although the money in your practice account isn't real money, you should still treat it as such so that you can, as closely as possible, simulate actual conditions.
You can experiment with the best amount for each investment, and revise your amounts and strategies if you lose the trade. Do you want $1 trades? $10? $100? Use the demo account to see what works best for you and your funds.
What To Look For In A Binary Trading Demo
Before you open a demo account, you want to make sure that it's actually free with whichever binary option broker you choose. You don't want to have to deposit real money before you can access the demo.
Occasionally, your binary demo account will offer contests or tournaments that have real money as a reward. This is a great bonus that gives you extra time to practice with funds that don't require you to drop your own money into the pot. Consider these components when you're deciding which binary demo account is best for you.
Variety of Assets To Trade
Having a diversified portfolio that simulates the types of assets you'd like to trade in real life is vital. Or, if you don't want a highly diverse list of assets, you at least want to ensure that the assets you are interested in trading are available for practice.
Perhaps you've only traded a few asset types in the past. A free binary options demo account will give you a chance to experiment with new assets in a risk-free setting. Ideally, a demo will offer you a sample of all the assets available with the live version.
Some common assets to look for include:
- Currency pairs such as GBP/USD
- Cryptocurrencies such as Litecoin and Bitcoin
- Commodities such as gold, silver, and oil
- Stocks from large companies like Disney, Amazon, and Nestle.
Access to diversified assets will enhance your use of the binary options demo account and allow you to strategize better and simulate what your real-life use of the platform could look like.
When selecting a binary trading practice account, you want to consider the trading platform itself. Is it easy to figure out where things are? A sophisticated trading platform might be able to do fancy things, but is it one that you can operate as a beginner?
You want a trading platform that allows you to trade without complicating things. The real-world trading process can work a little differently than the demo account (i.e., prices change quickly) and so you want to eliminate as much complication as possible in the trading platform itself.
Ask yourself these questions:
- Is the demo account compatible with the broker's mobile platform?
- How good is the alerts system? Am I able to receive notifications?
- Is the trading platform robust enough? Does it offer the tools I need?
Payouts on Successful Trades
When you are exploring a binary demo account, one of the most crucial parts is whether or not the payout rate for the demo account is the same as the payout rate for the actual platform.
To evaluate the platform properly, you need the payout rates to match. How will you know whether or not a platform is the best one for your needs if the payout isn't simulated in the same way as the real account? For example, if an asset pays out 70% in a standard account, the demo account should also pay out 70% for that asset.
Charts are critical for traders. They can help you learn and practice identifying patterns in the market, along with your trading habits. You'll want to have a wide variety of charts to help with your analysis as you learn.
How adjustable are the charts in your demo account? Can you change their colors and types? Do they have a high refresh rate?
Some standard charts to look for include:
- Bar chart
- Line chart
- Dotted chart
- Heikin-Ashi chart
- Japanese Candlesticks chart
When you're choosing a binary options demo account, keep in mind that you are testing out the trading platform. You want to make sure that the user interface and experience match your needs.
Do your research and make sure that the broker you're considering is regulated and has competitive payout rates. Practice until you feel confident in the platform and your strategy, then make your debut in the real binary options market.
Robert Wolfe is the founder and chief editor of Impact Investing Collaborative. Robert is an expert trader with over 10 years of experience trading binary options, Forex, and CFDs. He prides himself in providing accurate and in-depth reviews in order to help others find a trading platform that fits their needs. When Robert isn’t actively trading or managing Impact Investing Collaborative, he enjoys spending time with his 3 kids, playing golf, and spending time outdoors.