The benefits of using a binary options practice account to learn the ropes of binary options trading in a risk-free environment are readily apparent. Traders can learn exactly how the binary options marketplace works and develop trading strategies as well as test out a particular broker’s software and become familiar with the individual quirks of each trading platform. Simply put, using an options trading practice account before starting a career as a binary options trader should be something that every single person does.
Practising and honing ones skills with a binary options trading practice account is an extremely valuable tool, however, it does have a few weaknesses, as well. Unfortunately, as much as a binary trading practice account can teach you about the world of binary options, it cannot prepare you for the real-life trading experience, when money is on the line.
One of the things that most people find when they open a binary options trading practice account is that they are able to make trades with quite a large amount of fake money. Often times, this amount differs significantly from the actual amount of capital the trader has to invest in an account. Traders then develop strategies where certain losses are insignificant for the higher amount, but are quite costly for a lower amount.
For instance, a trader may be given $50,000 to play with in a practice account, but only have $10,000 that they will actually trade with. This can lead to problems with strategy; because with $50,000 a short-term loss of $5,000 is easily absorbed in the hopes of a long-term return, while losing $5,000 out of $10,000 is can be absolutely devastating. Therefore, it is important to keep the amount in your binary trading practice account as close as possible to the actual amount of money you have to invest in binary options trading.
The other thing that changes significantly when a trader makes the jump from a binary options trading practice account to a real-money account is that emotions now become a major factor. Fear, greed, hope, and despair are all parts of any decision made which involves real money, with real material worth. When trading with an options trading practice account, you can win and lose without batting an eyelid, because deep-down you know that it isn’t real. But when it comes to making the same trade with your own, actual money, things can change drastically.
While it is impossible to fully simulate the emotions of real trading in a fake environment, you can do your best to try to pretend that the money in your binary option trading practice account is real. It is best to also understand that you are going to feel these emotions when you trade for real, and they may cloud your judgement and make you do something that you know isn’t the best. If you know that this could happen, you can be more prepared to be disciplined and follow your rules when the time comes.
Binary option practice accounts are invaluable tools for learning how to trade and developing winning strategies for binary options trading. Just as long as you keep in mind that there are additional factors when it comes to real trading that you will never be able to experience in a demo or practice account. But if you are prepared to deal with these factors you will find that success is far easier to achieve.