Demo Trading Versus Live Trading
The Psychological Differences
Most traders find that there is a clear difference in their live-account trading performance versus their demo-account trading performance. for some reason it seems to be easier to Make money and have good results on a demo account than it is on their real money account.
now some state that thsis is because of the brokers manipulating the results to be more favorable for the demo account holders in the hope to convince them to deposit real money.
Thou i am sure that this has happened and with some of the more shady brokers still might be the case. most brokers do do this. a better reason for the differences in results would be your trading behavior on the demo trading account in comparison to the real money account.
Real Money Trading
There are not many things more exciting that you can do from home then opening real positions with real money, your heart will speed up and you will have adrenaline running through your system the moment you open the position , this is because on every level your being is aware that you are putting some real on the line.
You know that with trading in the financial markets with real money that there is clear and real possibility of losing your money.
The first element that you should realize when you are trading for real is that you are trading real money.
When you have a demo account you tend to just open trades and the fly and take less time and preparation to actually understand and decide if this trade should be opened. This is why a lot of traders that switch from the demo account to the real account find themselves in the middle of a losing streak when actually trading on demo went so well for them.
That is why a good trader on a demo account does not automatically translate to being a good trader with real money. The moment your funds can actually disappear people tend to have some panic reactions, are less decisive and MAKE STUPID DECISIONS.
So understand that when you start trading you will need to calculate your education money, this is the money you are bound to loose in the beginning till you learn and understand what works for you.
The most valuable thing we can learn from demo trading.
As a new trader the most important issue is to get:
the right habits
the right state of mind
the right education
Some is just learning the markets and actually understand what is your doing , this is the educational part, learning how to read technical analysis finding those assets that speak to you and learn what the rigt practices aere in trading in the market with real Money.
Putting this to actual use will be creating the right habits, this is the reason why it is so important to trade on the demo the same way you intent to trade on the real money account.
You will lose money and this you have to learn to accept. No trader when entering the market for the first time has been straight away successful and never had loosing trades since then , it simply does not happen like that.
So you have to accept that you might lose your money and this is where the pitfall is with the demo.
There is no emotion involved , I heard from traders that have been on the market for years and successful in doing so that they consider trading to be close to 70% depending on the psychology of trading and not just the market knowledge.
So Build your habits, get in the right mind set when trading , try to trade on the demo the same as you would on the real trading platform. Make it your mission to be just a thorough and patient as with trading real money.
If you are able to do this then the Demo or practice account has real value besides just telling which platform the broker uses or what they actual pay out are.