Virtual trading is a risk-free way of trading binary options. If used correctly, it can help you test yourself and your strategy and develop a profitable almost risk-free trading style. This article explains how virtual trading can help you become a successful binary options trader and how you can get started.
Specifically, this article answers the following questions:
- What is virtual trading?
- Why should I use virtual transactions?
- Where can I get the best virtual trading environment?
With this knowledge, you will immediately be able to 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. Everything else is exactly the same as with a regular transaction. 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 happens in a simulated environment. All prices, assets and binary options are real, 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 making real investments.
There are two basic forms of virtual trading. They are:
Virtual Trading, Type 1: Demo Account
A demo account is an account that gives you the same functions as a regular trading account. They give you the same features as a regular trading account, same binary options and same assets.
The big difference between a demo account and a regular trading account is that the demo account allows you to trade with play money instead of real money. When you get a new demo account, there will be a certain amount of play money waiting for you. The exact amount varies from broker to broker.
In this environment, you can trade just like you would with a real account, but you take no risk. You can try anything you like, but you won’t lose a single Cent. You get real prices and market volatility, and any decisions you make based on them will seeming completely real.
If you want, you can use your demo account like a game. The only difference is that if you are good at binary options trading, you can make the game a reality and make money. Demo accounts are a great way for those who have never tried 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 is somewhat outdated, but we would like to mention it at this point as an alternative to the demo account. If the demo account can’t get it for you, you can always go back to paper trading.
As the name suggests, paper trading happens entirely on paper. Instead of investing in a real binary option, you watch the market until you find a situation where you will invest based on your strategy. Note the details of the transaction – asset, expiry, investment and payout. Now wait until your option expires and note whether you will win or lose the trade. Also calculate the profit or loss you will make.
After a while, look at your notes and calculate if you make a profit.
This type of virtual trading is ideal for traders who cannot use a demo account for some reason. However, if you can use a demo account, there is no reason to go back to paper trading. The demo account can automatically do much of what you would have done manually with paper trading, which is why it is the superior alternative in 99 percent of all cases.
Why should I use virtual transactions?
Now you may be asking why virtual transactions should be used. After all, the point of financial investing is to make money. When you trade with play money instead of real money, this is not possible. However, there are plenty of good 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 are:
- Check out a broker,
- Strategy development,
- Test your strategy modification.
Each of these advantages applies to brokers at a particular stage of their career. Let’s take a closer look at each of these advantages.
Reason #1: Check a Broker
Binary options brokers are like cars. All promise to be the best and most reliable. The only thing to know which of them live up to their promises is to test them. Virtual transactions are equivalent to a test drive.
Just like cars, the differences between brokers are often small and difficult to pinpoint. Some brokers just feel more comfortable than others. This distinction is very subjective and the only way to know which broker is right for you is to test a few brokers with their demos.
Also, 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. Again, the only way to know which broker is best for you is virtual trading.
In our broker list we have listed the best brokers on the market right now. All these brokers are trustworthy, government regulated and completely trustworthy. But we cannot tell you which broker is best for you. You will do well with all of them, but if you want to make the best decision possible, you have to test them yourself.
Reason 2: Develop your strategy
Once you have found a broker you like, you must develop a profitable strategy. Like all newcomers to any field, it is very unlikely that you will get everything completely right on the first try. You will probably make a few rookie mistakes and do a few things that cost you trades. The consequences of these lost trades can be severe and can destroy you – unless you do them in the risk-free environment of virtual trading.
A demo account allows you to trade just like you would with a real account but without the consequences. Since newbies experience most of the negative consequences due to lack of experience, the demo account is the ideal tool for them.
We recommend all beginners to start their career with a demo account. Trade like you would with a real account and check your account balance weekly. Did you make or lose money this week? If you lose 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 will develop a strategy that you know makes you money.
Once you’ve been able to turn profits three or four weeks in a row, it might be time to move on to real money trading. Since you are familiar with the broker and its strategy, you will be able to make a profit from the very beginning.
Reason #3: Revise your strategy test
When you create a profitable strategy, you have two goals:
- Make sure your strategy is still profitable and
- Improve the profitability of your strategy.
These two reasons are the reasons why you must keep checking for revisions to your strategy. Unfortunately, you never know if the modification will actually improve the quality of your trade or reduce it. Even if they seem like a sure thing, there is always the possibility that your changes will derail your entire strategy and possibly ruin you as a result.
This is why you want to test changes in a risk-free environment before you apply them to your real money trading. Virtual trading provides you with the perfect environment for this experiment.
There are two ways you can use your virtual trading to test modifications to your strategy:
- Trade your new and old strategy simultaneously, new strategy with demo account and old strategy with your regular account. After a while, you can compare the results. If your new strategy gives you bigger profits than the old one, you know that the changes are good. This test 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 are using a complex strategy, it may not be possible to do it twice at once. Remember: you must avoid mistakes caused by being overloaded, or you falsifying your test results.
- Test your new strategy with a demo account while pausing your real money trading. After a while, compare your virtual trading results with the real money trading results you had before. This test is much easier to do, but it produces slightly less accurate results. However, as long as you execute a sufficiently high number of virtual trades with your new strategy, you will get good results.
We recommend every trader to use a demo account to try modifying their strategy. Even if you’ve been trading well for 30 years, looking at the market from a different perspective can only help.
Many successful traders spend a fixed time of the year experimenting with new things. For example, you can pause your real trading for a month out of the year and try new things, or you can lose a few days per month on virtual trading.
How to get started
Almost all binary options brokers now offer demo accounts. To get the best virtual environment, we recommend that newbies try IQ Option.
IQ Option offers the invaluable advantage of a no-deposit demo. Some brokers offer their demos as features of their regular accounts. You must have a regular trading account to get the demo and to get a regular trading account requires you to make a deposit. This means you have to deposit with a broker to test it.
These demos are free. If you don’t like the broker, you can simply withdraw and be done with it. But why deposit with a broker if you are not sure whether you want to trade with it?
The IQ Option demo is completely free to deposit. You can sign up for the demo by logging in with your Facebook account, Google account or email. This is the easiest start you can get into binary options, and that’s how things should go.
In addition, IQ Option is the highest rated broker based on customer satisfaction in our top list of brokers. You get high payouts, great assets and great binary options types. The no deposit demo allows you to test the best broker out there with absolutely no hassle.
If you can have the best for free, why would you 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 keep testing other brokers. But it can’t hurt to start with the best bet first.
Conclusion
Today, the most relevant form of virtual trading is the demo account. The demo account allows you to trade all the features of the broker completely risk-free, it 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 take a look at our list of brokers.