Sep 1, 2019 7:12pm

Live Trading Vs Demo Trading: Learn the psychological differences

As a beginner trader, you are always encouraged to practice demo trading before live trading. With Demo Trading, you can master core trading skills, create a trading plan, manage proper risk management, and try to understand trading psychology (at least we hope!) on the trading line.

Suppose that once you are in a consistent profitable position and have built your confidence in participating in live trading, you have decided that you will be able to open your live trading account. Since you have already won consistently over a demo account, the risk of making huge profits with the same amount of money in real risk is very difficult, shouldn't it?

Wrong! When most newbie traders come to live accounts from the demo, they usually believe their demo trading results can be easily replicated to a real account. Because of that, some become very frustrated when they realize that this is not always the case at all. There are a few reasons:

1. Real meaning means real emotions

As a traders, we try to be emotionless when making trading decisions. However, one can never fully control one's emotions and this cannot be helped when real money increases the risk of earning money from risk. For example, compare how you felt when you first set up your live trade with how you were trading in a demo account.

Did your vibration get faster? Did your hand tremble a little? 

If so, you've either gone crazy with joy or you've got a push of extra anxiety when you start live trading!

2. There is no real financial risk to the demo account

Even if you try to treat your demo account as a real one, there really is no real financial risk to the demo. You can suffer a few losses here and there, but, in the back of your mind, you know that you can pay your demo account at any time with fake cash.

If you have made many mistakes in a demo account, then you can easily take the comfort of a fresh start. And it puts you under pressure. By contrast, trading real money can hurt your trading confidence and subsequently fog your trading decisions. You don't have to go through this foggy situation if the price action forex trading course is done.

3. The temptation to sin trading is strengthened in live trading

As you are dealing with real financial risk, you will begin to invest more emotionally to improve the outcome of your trade. As a result, greed will be much stronger to get back into your bad trading habits. When you feel that you have finally overcome these habits, then you can find common trading sins, like your trade transactions, such as removing your stop losses, cutting off your winning trades, and trading revenge. For some traders, they create new problems by completely ignoring and disregarding their desires and their trading plans to prove that their live accounts can be just as profitable as their demo accounts.

So how do you deal with this difference? A good way to bridge the gap between demo and live trading is to apply the same mental state of mind as you have practiced emotionless trading on the demo account. You can do this by focusing on the trading process rather than focusing on profitability. Take one trade at a time and stay firm on it with a focus on your plan and proper risk management implementation. Make sure you can afford to lose up to that amount. It can relieve some of the stress and allow you to focus better on your trade.

Another good way to replicate your demo trading success is to have good trading habits, much like writing a trading journal. Write down what's happening in your live trades. How are they different from your usual demo trade? Are your responses and trading decisions different when you are trading with real money? What can you do better than this?

The essence

The mistakes you usually make to a live account may not be the ones in your demo. You will get an accurate idea of ​​the problem you need to emphasize as you work. Launching live trading from a demo is difficult and often leads to the loss of early trading, but that doesn’t stop you from coming back. You just handle the trade lightly and make sure you are aware and fully prepared for the emotional commitment required for live trading.