At present, new traders tend to commence their trading expedition with a demo account. A demo account is a practical and convenient way to gain an understanding of trading.
Approved that traders switch to a real account after they have achieved consistent results on the demo account.
Once traders have consistently made winning trades, they anticipate the same results will be repeated on their real account. Not only are these assumptions unrealistic, but they will also set you up for failure.
Before making the switch from practice to trading, it is essential to understand what makes these accounts different from one another.
Planning and considering all these points will better prepare you for the shift into a real account.
Understand the Risks of Trading
When trading on a demo account, no real monetary risk is involved. A trader’s failure to following their trading plan has no real consequences.
Losing streaks on a demo account is not as discouraging because you can recharge your account with more capital at your discretion.
While trading on a live account, there is a big difference. When your funds are at risk, and you are investing your hard-earned money, losses are going to hit much harder.
This is succession; it can resentfully impact your trading confidence and too illogical or unreasonable decisions. Plan accordingly and accept that losses are part of trading.
Trading with a demo account for an extended period can also lead to traders picking up new habits, which can be extremely hard to break once a trader starts to trade with a real account.
Furthermore, bad trading habits among beginner traders are one of the causes of their failure.
A trader might be convinced to overtrade or inadequately estimate risk when trading in a demo account. This behavior can result in a substantial negative impact when there is a transition to engaging in live trading.
The truth of the matter is when trading with a demo, and no matter how well you are doing on the demo account, you won’t be able to incur any trading profits until you start trading with a live account.
Know the Psychological Difference
Trading on a real account brings to mind a rollercoaster of emotions, mainly when there is a transition from demo trading.
You are bound to feel nervousness, excitement, and a rush of adrenaline throughout your first couple of trades. Increased feelings of anger or frustration may also manifest.
The important thing is to make an effort and keep your emotions under control. If the method you used on your demo account isn’t functioning the same manner on your real account, don’t be frightened to cut your losses and make an adjustment to your plan.
Poor habits like revenge trading may occur due to attempting to replicate your demo results.
Possible lack of emotional commitment when no real money is at stake also may create an unrealistically positive trading environment in demo trading that is not found in live trading when the trader’s account funds are definitely on the line.
Anticipate Changing Market Conditions
Market conditions change in a bat of an eye. Many new beginners may not be equipped to handle volatility, while others may find demanding to trade in a sideways or slow market.
Before making a transition from demo trading into real trading, ensure that you have a plan for all types of market conditions.
Instead of trading big or huge positions, you should start with smaller amounts.
Its better you only buy what you feel comfortable losing. You also escalate or expand your positions after attaining consistent gains and having more exposure under your belt.