Many traders feel a drastic change when they switch from a demo trading account to real trading. Well, this happens with everyone; you are not an exception to that. There is a lot of difference between trading with monopoly money and trading with real money, and in today’s article, we are going to decode that.
So, without further delay, let us discuss the key differences between demo trading and live trading.
This is the key difference that differentiates a demo account from a real account. When you trade with a demo account, you don’t have any tension of losing money because you know that, even if you lose all of your money, you can refill your account in the next second, but when you trade with the real account; that is not the case.
You can’t afford to refill your account once you blow up your initial capital, can you? So, In order to overcome this fear, there is only one solution for this problem. Trade with real money because unless and until you don’t trade with real money, you will not get the experience! There is no other solution for this, but make sure you are not trading with too heavy position sizing.
That being said, you should trade 1st in the demo account because there, you will learn how to calculate the right position sizing, how to place orders, and all other things. Once you get to know all these things, then you are ready to trade with real money. Lastly, I want to say that trading involves the risk of your capital, there is no doubt about it but the point is how well you manage that risk defines your profitability. So, start trading with a small account size and gradually scale up your capital as and when you overcome your fear.
For trading with a real account, not only real capital is required but also you need emotional capital, didn’t get this? I will explain it to you. When you hold a trade for hours or maybe for days, there is a constant fight going on in your mind, there are numerous thoughts coming into your mind at a different point in time. So in order to deal with all these, you need emotional capital, in other words, you need emotional control.
I don’t know whether you have noticed this or not but when you continuously trade for the whole day, you become exhausted. The reason behind this is, your mind and brain are continuously working whenever you are in a trade, but when you trade with a demo account there is no requirement of emotional capital because you think less about your trade. So, this is something that differentiates trading in a real account from a demo account.
I know many of you may get the question, “Is demo trading useful? and the answer to this is YES. A demo trading account is a very useful tool if you utilize it with its full potential.
Demo trading really helps traders to practice different trading strategies so that they can understand how that strategy performs over a longer time horizon if executed correctly. Not only this, but traders also get a chance to introspect themselves so that they can know where exactly they are making the error, and next time when trading, they can improve all those mistakes and I think this is the biggest advantage of a demo trading account.
In my opinion, before trading with a real trading account every trader should backtest his/her strategy in a demo trading account. Basically, there are 2 advantages of this, one is, you get to know how your strategy is going to work in different market cycles, and the second is you get the confidence to trade. Even if you make losses in 2 or 3 consecutive trades you will not lose confidence because you know, your strategy is going to make you a profit in the long run if you execute it correctly.
I hope that through this article, I was able to explain to you the key differences between a demo trading account and a real trading account. If you have any doubts regarding this topic then please post them in the comment section.
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