Differences that matter: demo and trading accounts

Differences that matter: demo and trading accounts

 

Two days ago we spoke about different ways to understand whether it is time to move from a demo trading account to a real trading account. However, we have not mentioned the differences of these types of accounts in terms of trading psychology. Let’s see:

 

1 - A real account switches on real emotions

 

Trying to keep emotions away from your trading terminal might be the right thing to do, but let’s all simply agree on the fact that that is quite unnatural. Emotions, if managed correctly, can actually help you become a better trader.

 

Staying emotionless in a demo account is rather easy as you operate in a risk-free trading environment. When real money is on stake, emotions become stronger and the game gives a 360 degree turn that could threaten your portfolio.

 

2 - Development of risk management skills

 

You have no liquidity problems. In less than 10 minutes, your account has received 10,000 USD for trading. Of course, I am talking about a demo account. As everything moves smoothly, you don’t really think about the size of your trades. Until markets hit you and your balance falls down.

 

The problem is… there is no “restart” button in a real account. That is why practicing risk management skills EVEN when operating in a demo version will put you a step ahead.

 

3 - When real bucks are on play, things get serious

 

Despite the obvious limitations of a demo trading account, you make it more realistic by just changing your attitude and mindset from demo to real.

 

Build habits of real traders, be consistent, be methodic, be smart. Read the news, analize and do not get lazy. Staying on top of the game is falls entirely on your hands.

 

Practice risk management as a real pro will do. Set right your stop loss and take profit orders. Do not risk more than 1% of your capital in a single trade.

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