Virtual trading is a way to trade risk-free binary options. Used correctly, it can help you test yourself and your strategy and develop a profitable trading style almost risk-free. These articles explain how virtual trading can help you become a successful binary options trader and how to get started.
In detail, this article answers these questions:
- What is virtual trading?
- Why should I use virtual trading?
- Where can I find the best virtual trading environment?
With this knowledge you will be able to immediately improve your binary options trading with virtual trading.
What is virtual trading?
Virtual trading means trading binary options in a virtual environment. Instead of investing real money, you trade with play money. All other things are exactly the same as with regular trading. You get the same tools, the same features and the same trading style.
The only difference between regular trading and virtual trading is that regular trading has consequences, while virtual trading takes place in a simulated environment. All the types of price, assets and binary options are, but the profits or losses you make with them are not. You are more or less playing a game based on the real world instead of really investing.
There are two basic forms of virtual trading. They are:
Virtual trading, type 1: demo accounts
Demo accounts are accounts that offer you the same features as a regular trading account. They offer you the same features as a regular trading account, the same types of binary options and the same assets.
The big difference between a demo account and regular trading accounts is that demo accounts allow you to trade with play money instead of real money. When you get a new demo account, there will be a certain amount of money waiting for you. The exact amount varies from broker to broker.
In this environment you can trade as with a real account, but you are free from any risk. You can try all you want but you won’t lose a single Cent. You get the real prices and market movements, and every decision you make based on them looks completely real.
If you want, you can use your demo account like a game. The only difference is that if you are good at trading binary options, you can actually make the game and earn money. Demo accounts are a great way for people who have never tried binary options to see if they have what it takes to succeed in this environment.
Virtual trading, type 2: paper trading
Paper trading is the original form of virtual trading. It’s somewhat outdated, but we wanted to mention it at this point as an alternative to demo accounts. If it is impossible for you to get a demo account, you can always fall back on paper trading.
As the name suggests, paper trading takes place entirely on paper. Instead of investing in a real binary option, you monitor the market until you find a situation in which you would invest based on your strategy. Note the details of the trade – the asset, the expiration, the investment and the payout. Now wait until your option expires and note whether you would have won or lost the trade. Also calculate the profit or the loss you would have made.
After a while, look at your notes and calculate whether you would have made a profit overall.
This kind 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 fall back on paper trading. A demo account can automatically do many of the things you do with paper trading, which is why it is the best alternative in 99 percent of all cases.
Why should I use virtual trading?
Now you may ask why you should use virtual trading. After all, it is to make money. If you trade with play money instead of real money, this is impossible. Nevertheless, there are good reasons why every trader should use virtual trading. Let’s take a closer look at these reasons.
There are three main reasons for using virtual trading. They are:
- Test a broker,
- Develop a strategy,
- Test modifications to your strategy.
Each of these benefits applies to brokers at a specific stage in their career. Let’s look at each of these benefits.
Reason # 1: test a broker
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 promises is to test them. Virtual trading is the equivalent of a test drive.
Just like cars, the differences between brokers are often small and hard to pin down. Some brokers just feel more comfortable than others. This difference is very subjective, and the only way to know which broker is best for you is to test a few brokers with their demos.
Moreover, all brokers offer different payouts in different market situations. It is impossible to say which broker offers the best payouts for your strategy. Some traders do better with one broker, other traders do better with another. The only way to know which broker is best for you is virtual trading.
On our broker list we have now listed the best brokers on the market. All these brokers are reliable, government regulated and completely trustworthy. But we cannot tell you which of these brokers is best for you. Everyone is fine, but if you want to make the best possible decision, you have to test it yourself.
Reason 2: develop your strategy
Once you have found a broker you like, you need to develop a profitable strategy. As with all newbies in any field, you are unlikely to get it right on your first try. You are probably going to make some rookie mistakes and do some things that lose you trades. The consequences of these losing trades can be severe and can potentially destroy you – unless you do it in the risk-free environment of virtual trading.
With a demo account you can trade like with a real account, but avoid the consequences. Since newcomers mostly have negative consequences due to inexperience, a demo account is the ideal tool for them.
We recommend that all newbies start their career with a demo account. Trade just like with a real account, and check your balance weekly. Did you make or lose money this week? If you lost money, why? What can you do to improve?
Ask yourself these questions until you make a profit. Keep trying new things and improving your strategy, and eventually you’ll develop a strategy that you know is worth your money.
Once you have been able to make a profit for three or four weeks in a row, it is probably time to switch to real money trading. Since you are already familiar with your broker and your strategy, you should be able to profit from the start.
Reason 3: Test changes to your strategy
After creating a profitable strategy, you have two goals:
- Make sure your strategy remains profitable, and
- Improve the profitability of your strategy.
These two reasons are why you should keep testing adjustments to your strategy. Unfortunately, you never know if adjustments will improve or decrease the quality of your trade. Even when it looks like a certain thing, there is always a chance that your changes will ruin your entire strategy and consequently destroy you.
This is why you want to test changes in a risk-free environment before applying them to your money trade. Virtual trading offers you the perfect environment for this test.
There are two ways you can use your virtual trade to test modifications to your strategy:
- Trade your new and your old strategy at the same time, the new strategy with your demo account and the old strategy with your regular account. After a while you can compare the results. If your new strategy made you a bigger profit than your old one, you know the changes were good. This way of testing gives you the most accurate results because you test both strategies in the same market environment. It also requires the most attention to detail. Especially if you use a complicated strategy, it is impossible to execute it twice at the same time. Remember: you must avoid errors due to overwhelm, or you may distort the results of your test.
- Test your new strategy with your demo account while you pause your real-money trading. For a while, compare the results of your virtual trading with the results of your real money trading that you had before. This way of testing is much easier to perform, but it produces slightly less accurate results. Nevertheless, as long as you execute a large amount of virtual trades with your new strategy, you should get a good result.
We recommend that every trader should use a demo account to try out modifications to their strategy. Even if you’ve been trading well for 30 years, it can only help to see the market from a different perspective.
Many successful traders dedicate a set time of the year to testing new things. For example, you can stop your real trading for one month of the year and try new things, or you can take a few days each month for virtual trading.
How to get started
Almost all binary options brokers now offer demo accounts. To get the best virtual environment, we recommend newbies to try IQ option.
IQ Option offers the invaluable benefit of a deposit-free demo. Some brokers offer their demos as features of their regular accounts. You need to get a regular trading account to get the demo, and to get a regular trading account you need to deposit money. This means that you have to deposit money with a broker to test it.
These demos are also free. If you don’t like the broker, you can simply withdraw your money and be done with it. But why deposit money with a broker if you are unsure whether you want to trade with it?
The IQ Option demo is completely deposit-free. You can sign up for the demo by simply signing in with your Facebook account, your Google account or your email address. This is the easiest start you can get into binary options, and that’s the way things should be.
Additionally, IQ Option is the highest rated broker based on customer satisfaction in our top brokers list. You get high payouts, big assets and big types of binary options. With the deposit-free demo, you can test the best broker out there without any problems.
If you can get the best thing for free, why test anything else?
Of course, there is still a chance that IQ Option is not the right broker for you. In this case, you should continue to test other brokers. But it can’t hurt to start with the best option first.
Closing
The most relevant form of virtual trading these days is a demo account. Demo accounts allow you to trade all features of a broker completely risk-free, which is the right environment to test yourself, the broker, and create a successful strategy.
If you are still looking for the right broker for your virtual trading, we recommend you to our broker list.