Newbies often ask about demo accounts. A demo account is an account with virtual money given to any customer without investing real money but with the possibility to trade binary options. Even experienced traders also sometimes ask for demo accounts in order to check a broker and his or her trading platform before they invest.
In this article, I want to analyze the advantages and disadvantages of demo accounts. The main advantage is each client can actually test the broker’s site, trading platform, quotes, trading tools and assets,so he or she can trade without investing real money.
Moreover, demo accounts are great for traders who decide to test their own trading strategies before risking their real money. The literature gives some examples, such as trade on paper, i.e., you don’t make any investment and you just record all the transactions that you’d make if you had the real account. However, today, this method is not as popular since more brokers provide the ability to open demo accounts.
At the same time, there is quite a big disadvantage, which is usually faced by many newcomers.
This disadvantage lies in psychology. People who are constantly trading on demo accounts change their attitude toward real money. This psychological moment causes deterioration of the results after the trader starts to use the real account. He or she doesn’t apply the same significance to virtual money as to his or her own, so the transactions are made without analysis.
The trader fails to properly assess the situation and realize the possibility of a real loss. The attitude to real money becomes less anxious, the fear of losing money disappears, and discipline vanishes. The trader is controlled by his or her emotions.
Therefore, we must understand that in order to start making good money with binary options, we must try to be brave and not go from one demo account to another. Don’t be afraid to take a step in the right direction.