Demo trading is the mode of operation trading platform, identical to real trading using a "game deposit". Funds earned or lost as a result of profitable and unprofitable transactions are not debited and are not credited to the trader's real account.
There is no consensus among traders about the benefits or harms of demo trading, as the arguments are the inability to take into account the emotional factor. It is believed that for the benefit of "training" or checking the strategy, a small amount of real funds must be present.
Demo trading on the market binary options due to the specifics of contracts have a number of distinctive features that prove the need for their application.
Features of demo trading of the binary options market
1. Exponential - a broker that organizes demo trades for a client indirectly shows the viability of the business and the seriousness of intentions in organizing work. The company's savings on demo software is the first sign of a HYPE, which is common in the field of binary options trading.
2. The need to master the features of the types and conditions of execution of binary options. In addition to the "Above/Below" contracts, the rest of the options are not standardized, so the terms of their execution and the mechanism of action vary from broker to broker. Despite the presence of the specification, it is better for a trader to master the binary options that interest him at demo trades.
3. Features of the trading platform. Despite the presence of a stable market of software providers for binary options, brokers tend to customize and remake terminals "for themselves", integrating them with the functionality of the Personal Account, expanding or closing some of the options. Therefore, starting to work with a new company, despite the" familiar " terminal (even in the case of Metatrader 4), the trader should get used to the "demo trading" mode in order to avoid mistakes that lead to the loss of funds on real trading.
4. Training of signal processing. Many strategies for binary options trading based on technical indicators, sometimes implemented on a third-party terminal. After tests, before trading on a real account, a trader needs to practice instantly working out the signal that has arisen in the binary options trading platform. Sometimes you may need additional settings or a monitor to avoid wasting time on minimizing the transaction confirmation option windows. The trader's task is to minimize the period between receiving and processing the signal.
5. Debugging. Some brokers provide the opportunity to automate binary options trading or connect third-party software that manages the opening of positions through the API. A demo account is necessary for the process of debugging and configuring the "bundle" of two platforms or the operation of an algorithmic system.
Types of demo accounts
1. Demo account with full emulation of trades. The broker provides the trader with a 100% matching demo account with an unlimited amount of funds and time.
2. A periodic demo account. The broker gives access to the terminal with a certain amount bonus funds, which can be traded without crediting profits and losses, only for a certain calendar period.
3. Free options or no deposit bonus. The trader has access to real trading on the broker's funds or a certain number of options fixed by the type and size of the investment. The peculiarity of the account is that the profit is credited to a real deposit.
Bonus accounts are subject to the conditions of "working out" or restrictions on the withdrawal of profits, which a trader should carefully study if he claims not only to study, but also to earn.
Disadvantages of demo binary options trading
Comments related to the lack of an emotional component, according to research by psychologists and tests by brokers, are completely fair. This is evidenced by the difference in performance and the number of errors that increases when switching to real accounts.
A trader can easily see this if he keeps a diary of transactions, consistently describing trading actions in the "demo mode" and trading on a real deposit. The loss of funds will lead to doubts and attempts to urgently correct the strategy, with a profit there will be excitement, pushing to increase the size of investments.
Demo trades may not coincide with real fluctuations quotes. In real trading, the price levels at which options are opened may be "worse than the market", the broker will close part of the trading period due to the absence of liquidity in the market or other conditions.
Free options often cause a trader to earn start-up capital using casino techniques, instead of working out or checking strategies.