Virtual trading is a risk-free way to trade binary options. When used correctly, you can test yourself and your strategy and develop a profitable trading style with virtually no risk. This article explains how virtual trading can help you become a successful binary options trader and how you can get started.
In detail in this article:
- What is virtual trading?
- Why should I use virtual trading?
- Where can I get the best virtual trading experience?
With this knowledge, you can instantly improve your virtual trading and binary options trading.
What is virtual trading?
Virtual trading means trading binary options in a virtual environment. Trade with play money instead of investing real money. Everything else is the same as normal trading. You get the same tools, the same features, and the same trading style.
The only difference between regular and virtual trading is that virtual trading takes place in a virtual environment while regular trading has consequences. All prices, assets and types of binary options are real, but the gains and losses from them are not. Instead of investing in reality, you are playing a game based on the real world.
There are two basic forms of virtual trading. they:
Virtual Trading, Type 1: Demo Account
A demo account is an account that provides the same functionality as a regular trading account. It offers the same features, same binary options types and same assets as regular trading accounts.
The main difference between a demo account and a regular trading account is that a demo account allows you to trade with play money instead of real money. A certain amount of play money is waiting for you when you get a new demo account. The exact amount varies from broker to broker.
In this environment, you can trade just like you would with a real account, but without the risk. You can try what you like but you won’t lose a single cent. You will get real prices and market movements, and any decisions you make based on them will look completely real.
The demo account can be used like a game if desired. The only difference is that if you are good at binary options trading, you can turn the game into reality and make money. A demo account is a great way for those who have never played binary options to see if they have what it takes to succeed in this environment.
Virtual Transactions, Type 2: Paper Transactions
Paper trading is the original form of virtual trading. It’s a bit outdated, but I wanted to mention it at this point as an alternative to a demo account. If you can’t get a demo account, you can always move on to paper trading.
As the name suggests, paper trading is entirely on paper. Instead of investing in real binary options, follow your strategy and monitor the market until you find a situation to invest in. Note the details of the transaction (asset, maturity, investment and payout). Now wait for the option to expire and see if you won or lost the trade. Also calculate your profit or loss.
After a while, look at your notes and calculate if you made a profit overall.
This type of virtual trading is ideal for traders who for some reason cannot use a demo account. However, if you can use a demo account, there is no reason to go back to paper trading. A demo account is an excellent alternative in 99% of all cases, as it allows you to automatically perform many tasks that were previously done manually with paper trades.
Why should I use virtual trading?
You may now ask why you should use virtual trading. After all, the point of investing in finance is to make money. This is not possible if you trade with play money instead of real money. Nonetheless, there are many reasons why every trader should use virtual trading. Let’s take a closer look at these reasons.
There are three main reasons to use virtual trading. they:
- Broker test
- Develop a strategy
- Test your strategy modifications.
Each of these advantages applies to brokers at certain stages of their careers. Let’s take a closer look at each of these advantages.
Reason #1: Broker test binary
Options brokers are like cars. They all promise to be the best and most reliable. The only way to know which of them keep their promise is to test them. A virtual trade is equivalent to a test drive.
As with cars, the differences between brokers are small and difficult to pinpoint. Some brokers feel more comfortable than others. This difference is very subjective and the only way to know which broker is right for you is to test a few of them with demos.
Also, every broker offers different payouts depending on market conditions. It is impossible to say which broker offers the best payouts for your strategy. Some traders do better with one broker, others with a different broker. Once again, virtual trading is the only way to know which broker is best for you.
In our broker list, we have listed the best brokers for the current market. All of these brokers are reliable, government regulated and completely trustworthy. However, we cannot tell you which broker is best for you. You will do fine with all of them, but you should test yourself to make the best decisions.
Reason #2: Developing a Strategy
Once you’ve found a broker you like, you need to develop a profitable strategy. Like all newcomers in any field, you are unlikely to get things done perfectly on the first try. You’ll probably do a few things where you make rookie mistakes and lose deals. The consequences of these lost trades can be severe and ruin users unless they are made in a risk-free virtual trading environment.
A demo account allows you to trade just like a real account, but avoid consequences. A demo account is an ideal tool for beginners, as they mostly face negative consequences due to lack of experience.
All newcomers are advised to start their career with a demo account. Trade just like you would with a real account and check your account balance weekly. Did you make any money this week? If you lost money, why? What can I do to improve?
Ask these questions until you make a profit. If you keep trying new things and improving your strategy, you will eventually develop a strategy that will make you money.
When you can be profitable for 3 to 4 weeks in a row, it may be time to switch to real trading. You are already familiar with brokers and strategies, so you can start making money right from the start.
Reason #3: Testing strategy modification
After creating a profitable strategy, you have two goals.
- Maintain the profitability of your strategy
- Improve the profitability of your strategy.
For these two reasons, you should keep testing modifications to your strategy. Unfortunately, you never know if the fix will actually improve or reduce the quality of your trades. Even if they seem obvious, it’s possible that your changes will ruin the entire strategy, and possibly ruin you as a result.
That’s why we try to test our changes in a risk-free environment before putting them into real trading. Virtual trading provides the perfect environment for this test.
There are two ways you can test your strategy modifications using virtual trading.
- Swap new and old strategies simultaneously, new strategies for demo accounts and old strategies for regular accounts. After a while you can compare the results. You know the change is good if your new strategy produces bigger returns than your old one. This test method provides the most accurate results because it tests both strategies in the same market environment. It also requires the most attention to detail. Running it twice at the same time can be impossible, especially with complex strategies. Remember: You are overwhelmed and need to avoid mistakes or distort test results.
- Test new strategies with a demo account while pausing real trading. After a while, compare your virtual trading results with your previous real trading results. This test method is much easier to implement, but the results are slightly less accurate. Nonetheless, as long as you do a sufficient number of virtual trades with your new strategy, you can get good results.
We recommend that all traders use the demo account to modify their strategies. Even if you’ve been trading well for 30 years, it can be helpful to look at the market from a different perspective.
Many successful traders test new things out during certain times of the year. For example, you can pause real trading for a month and try something new, or take a few days each month for virtual trading.
How to get started
Almost all binary options brokers now offer demo accounts. We recommend that beginners try IQ Option to get the best possible virtual experience.
IQ Option offers the invaluable advantage of a no-deposit demo. Some brokers offer demos as a feature of regular accounts. You must have a regular trading account to get the demo and deposit money to get the regular trading account. This means you have to deposit money into the broker to test it out.
This demo is also free. If you don’t like the broker, you can withdraw your money and be done. But why deposit money with a broker if you are not sure if you want to trade?
IQ Option demo is completely free of deposit. You can sign up for the demo by simply logging in with your Facebook account, Google account or email. This is the easiest way to get started with binary options and how it works for you.
Additionally, IQ Option is the highest rated broker based on customer satisfaction on our top list of brokers. You can get high payouts, great assets, and outstanding types of binary options. Deposit free demos allow you to test the best brokers without any hassle.
Why try something else when you can get the best for free?
Of course, IQ Option may not be the right broker for you. In this case, you should continue testing other brokers. However, it can’t hurt to start in the best way.
Conclusion
The most relevant form of virtual trading today is the demo account. A demo account allows you to trade all the features of the broker completely risk-free. This is the right environment to test yourself as a broker and formulate a winning strategy.
If you are still looking for a broker that is suitable for virtual trading, we recommend that you take a look at our broker list.
