Have you ever mastered a skill without practicing it? Probably not. Everything we learn requires a learning phase, during which we make mistakes and learn from them. Binary options are exactly the same. The difference between learning binary options and learning to paint, for example, is that a mistake with binary options can cost you a lot of money. Learn all about demo trading here:
To avoid having your unavoidable rookie mistakes ruining you, binary options brokers have created a learning tool that allows you to make your rookie mistakes in a risk-free environment. This tool is a demo account.
A demo account is your partner in learning binary options and can help you to save money and start a successful trading career.
What is demo trading?
On first sight, a binary options demo looks exactly like a real account. You get all the functions, all the assets, and all the binary options types a trader with a real account gets. The big differences is that you do not invest real money – your broker provides you with play money.
With this play money you can test every aspect of your demo account, you can test yourself, and you can test your trading skills. You can:
- Analyze the market and find trading opportunities,
- Invest in currencies, indices, stocks, and commodities,
- Trade high / low options, one touch options, boundary options, 60 seconds options, ladder options, iFollow options, options builder, and long term options (depending on which assets your broker offers),
- Watch your account balance grow or shrink.
Investing with a demo account works exactly like investing with a real trading account. You select your binary options type, your asset, and the expiry and the direction you think the market will move in – and you are done. The entire process takes less than a minute, and even complete newcomers can master this simple approach to trade the financial markets with their first try – trading the market has never been easier.
How demo trading can help you to get rich
If you want to become financially independent by trading binary options, a demo account is an important partner on the way. Mainly, a demo account can help you to create a trading system that you know will earn you money. By applying this trading system in your real-money trading, you will be able to continuously increase your account balance, eventually becoming rich and financially independent.
The most crucial aspect to understanding this approach is realizing that binary options is a numbers game. Much like applying for a job or college requires you to send out more than one application because you know that you probably only have a 10% chance to be accepted, your strategy defines your trading approach so exactly that you can predict which part of your trades you will win.
When you multiply this winning percentage with your average payout, you can tell whether your strategy will make you money. Here’s an example:
Imagine that you have tried a trading strategy with a demo trading account for two months. You know that you will win 70 percent of your trades with this strategy and get an average payout of about 70 percent. This allows you to calculate whether this strategy would make you money:
- For the average winning trade, you get your investment + 70 percent back. This means you end up with 1.7 times your original investment.
- You get an average payout of 70 percent 0.7 times your investment.
- By multiplying both values, you know whether the strategy makes you money. If the value is bigger than 1, you make money. If it is smaller than 1, you lose money. If it is exactly 1, you will end up with as much money as you started.
- In our example you would get: 1.7 x 0.7 = 1.19. This means you will make money – with the average trade you will get 1.19 times your original investment back. In other words: your average trade makes you a profit of 19 percent.
- To put this result into perspective, consider its long-term implication if you stick to your trading strategy and always invest a fixed percentage of your overall account balance.
- Over 10 trades, you will have made a profit of almost 6 times your original investment.
- Over 50 trades, you will have made a profit of almost 6,000 times your original investment.
- Over 100 trades, you will have made a profit of 35,867,089 times your original investment.
If you started with an original investment of $10, this would in theory translate into a profit of $358,670,897 over 100 trades, which you can complete within a month.
This is how a demo can make you rich. It can help you to enter the market with a strategy that you know will make you rich.