Are you looking to get started with binary options? Our binary options demo account guide helps you make the most of your demo account, putting you in a position to become a successful trader without having to risk a single Cent of your money.
The step by step binary options demo account guide
Binary options demo accounts are a great tool to get started in the world of financial investments. Allowing you to try binary options risk-free, a demo account enables you to master your trading before you have to invest real money.
Our step-by-step plan shows you how to use a demo account to master binary options, enabling you to enter real-money trading with a system that you know works and that is guaranteed to make you money.
1. Get to know your trading platform
Your first step on your way to becoming a trading professional is getting to know your demo account’s trading platform. While the platform might look a bit intimidating at first, learning how to use it will pay huge dividends throughout your entire career.
Most binary options trading platforms are like different cars. While there are certain notable differences, they all look similar and handle similarly. If you learn to trade with the trading platform in front of you, you will be able to manage them all.
Here are the basics you have to know:
- Find the selection area for your binary options type: In a prominently placed part of the trading platform, your broker allows you to choose the binary options type you want to invest in – high / low options, 60 seconds options, one touch options, etc. For now, focus on high / low options, the simplest binary options type.
- Select the asset you want to trade: Depending on which binary options type you have selected, you will see a list of assets that is available for this type. Click the asset you like, and the platform will open a price chart displaying the assets price movements.
- Analyze the price chart and invest: Use the price chart to find a profitable trading opportunity. Once you have found one, switch to the part of the window where you can edit the details of your binary option. Choose the expiry and the overall investment amount, and invest in the direction you believe the price will go.
This pattern applies to all binary options brokers. Master it, and you are sure to feel comfortable in any situation you encounter.
2. Discover the different binary options types
Once you have learned the basics of your binary options demo account, you can take the next step, expanding your trading to option types beyond high / low options. While high / low options are the go-to tool for most binary options traders, understanding the other options types can help you to increase your profits in situations where these options types allow for higher payouts.
Here are the basics you have to know:
- Use one touch options for strong movements: With one touch options, you can predict whether the market will reach a faraway target price. Involving more risk because of the faraway target price, one touch options also offer higher payouts – often up to 500 percent.
- Use boundary options for strong movements if you can’t predict the direction: Sometimes, for example when big news are scheduled to hit the market, you are unable to predict which direction the market will move in. Boundary options are the perfect tool to trade these movements, offering a target price to either side of the current market price and providing higher payouts than high / low options.
- Use 60 seconds options to increase excitement and make more money: 60 seconds options are high low options with ultra-short expiries of only one minute. Allowing you to make more trades in the same period of time, 60 seconds options increase both your earning potential and your excitement.
Try all the different binary options types, at least, a few times. Find out which you are most comfortable with and which you can use successfully.
3. Find a strategy
Now that you know which tools you have at your disposal, it is time to forge them into one strategy that defines how you use them. Your strategy is your guide to long-term trading success, telling you how to find trading opportunities and which tools to trade them with.
There is an almost infinite amount of trading strategies, but to help you get a start, here are some of the most popular options that many traders employ:
Trading trends with high / low options
When the market moves up or down, it rarely moves in a straight line. More commonly, it moves in zig-zag movements that create continuously higher or lower highs and lows. These zig-zag movements are called trends. Trends often last for a long time, thereby allowing binary options traders to make secure predictions. To make money by trading trends, you can either trade each swing from high to low and vice versa or the trend as a whole.
Depending on how much risk you are willing to accept, you trade a trend with one touch options, which create higher payouts but involve more risk, or with high / low options, which are the slow and steady alternative.
Trading candlestick formations with 60 seconds options
Candlesticks are special ways to display price movements by aggregating movements over a certain period of time into one candlestick. With this simple trick, candlesticks create distinct price formations that help you predict what will happen next.
Candlestick formations are easy to learn and ideal for beginners. Often, a single candlestick can make a solid prediction about what will happen next. By learning four or five of these simple candlestick formations, newcomers can gain deep insights into the market, allowing them to find trading opportunities in any market environment.
Because simple candlestick formations are based on only one candlestick, they focus on a very narrow segment of market movements. Consequently, their predictions are also only valid for the near future and should be traded with a short expiry. 60 seconds options are perfect for trading candlestick formations.
Trading the news with boundary options
We have already touched on this trading strategy. When big news are scheduled to hit the market, it is often difficult to predict whether the news will be good or bad and whether the market will go up or down as a result. For example, when the government is about to publish new unemployment numbers, it is almost impossible to predict whether these numbers will bear a good or a bad surprise.
You do know, however, that the market is highly likely to show a strong reaction to the news. In combination with the precise timing that a scheduled announcement allows, you can invest in a boundary option right at the time when the news is about to reach the market.
Covering both sides of the market, the boundary option will make sure that any reaction – good or bad – will make you money. Since you know exactly when the news will be published, you can time your option well, keeping your expiry short and your target prices close.
4. Define your money management
Once you have found your trading strategy, you need to define your money management. Trading strategy and money management work as a pair: your trading strategy tells you what to invest in and your money management tells you how much to invest.
Depending on how much risk your strategy involves, you should invest more or less money in a single trade. With a secure strategy, you might be able to invest 5 percent of your overall account balance per trade, but with a risky strategy you should invest significantly less, probably around 2 percent. Your demo account provides you with ample opportunity to find the right value through trial and error.
The main goal of your money management is to help you survive losing streaks. Since binary options are a numbers game, you will inevitably encounter periods where you lose a number of trades in a row or with few winning trades in between them.
By investing a small, fixed percentage of your overall capital per trade, you make sure that you always invest the right amount of money for your capabilities. You reduce your investment per trade when your account balance decreases and that you invest more as your account balance grows.
5. Perfect your trading
Now you have the basic outline for your trading. To trade successfully over a long period of time, you will always need to keep perfecting your trading strategy. Find a way to do more of what works for you and less of the things that lose you money.
Luckily, there is a perfect tool to help you with this process: a trading diary. In your trading diary, you note your thinking behind every trade, keeping track of both the causes and the results of your investments. By comparing both elements, you can identify what works for you and what does not, strengthening your strengths and eliminating your weaknesses,
In detail, here’s what you should focus on in your trading diary:
- What was the basic motivation for your trade? Did you follow a trend, trade a candlestick formation, or trade the news?
- Which option type did you use?
- Which expiry did you use?
- Which type of asset did you trade?
- What was your mindset? Did you feel relaxed or were you distracted, emotional, or tired?
Keep track of all these elements in an Excel document, and you can easily sort and evaluate your data. (Of course, you can modify and extend the exact list as you wish.) Soon you will now if you can create better results by focusing on shorter or longer time frames, by trading currencies or stocks, and by trading in the morning or in the afternoon.
6. Start trading with real money, but start slow
Regardless of how comfortable you feel trading with your demo account, always start small when trading with real money. Your demo account has prepared you well, but real trading feels slightly different than demo trading. After all, you now risk real money and not just some play currency – nothing can quite prepare you for this difference.
To get used to this slightly different mindset, ease into it by starting with a small investment. Later, you can always increase your investment, but if you start too big, get nervous, and lose money, you can never get it back.
Follow this final step, and you should be well on your way to becoming a successful binary options trader. Good luck and enjoy the process!