You will learn about the following concepts
- Why start trading with a demo account
- How can a demo account help you
- Overusing a demo account can be bad for you
- Money management & demo accounts
Why a Demo Account?
We have talked about demo accounts and why it is important to have one at an earlier stage of our tutorial. Let us say it again – in short, demo accounts are completely free and are considered as one of the best ways to improve your trading skills and to test different trading strategies. Generally, demo accounts are the same as real money accounts, but one difference is that you will be operating with virtual/demo money instead of real money.
Almost all binary options brokers allow trading with demo accounts, but on some rare occasions you may come across a broker, that does not support them. This is why it is important to always check the features offered by your broker.
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How Can a Demo Account Help You?
If you are a beginner, then using a demo account is strongly recommended. First of all, demo accounts are a great way to learn how to use the trading platforms supported by your broker. This way you can get to know every part of the platform without risking real money. You will learn how to execute trades and how to take advantage of the more advanced options features offered by the trading platform.
Demo accounts are also a great way to test new strategies or learn how to trade different types of binaries. In our tutorial we shall discuss touch/no touch options, boundary binary options, call/put options, so using a demo account can give you the opportunity to learn all about these financial instruments without risking any money.
Overusing a Demo Account Can Be Bad For You
Although many experts recommend trading with a demo account, you should not do this for too long. When using a demo account, you do not risk real money, so it is very likely that you will forget trading involves risk. Many traders use demo accounts in the wrong way and place trades they would not risk placing when trading with real money. This is why if you are planning to use a demo account, you should trade as if you were risking your own money – operate with smaller amounts, manage your account properly and never underestimate the profit/loss that a trade may generate.
If you do not use your demo account well, then it is very likely that you will do so when you start trading with real money. Always analyze every trade and never make a hasty decision, because this is the way you are supposed to behave when trading with a live account.
Money Management & Demo Accounts
Money management is the art every trader needs to master. However, this can rarely be done with the help of a demo account, especially if you are not patient enough and are not used to following a strict list of trading rules. The reason why most traders cannot learn how to manage their money properly while working with a demo account is, because they are trading with virtual money and they assume that it does not matter whether they will lose thousands, or not. This is why many traders make a mistake by using their demo accounts to trade with enormous amounts of money. For example, if you are planning to deposit $500 in your account, then try operating with just $500 in your demo account. This way you will make the trading experience more realistic and learn how to control your money.