5 min read
Most traders have used the demo account at some point in their business. Some of them wanted to test themselves before investing their funds, others wanted to test strategies and refine their skills. Traders are usually encouraged to trade in the demo account, however many people find it difficult to replicate their trading results when they finally move to the real account. The psychological differences between the two accounts can be traced back to the type of the account.
1. Real money involves real emotions
When there is no real money at the bottom, the trader will be calm and will retain control, regardless of the size of the transaction. However, when switching to the real account, the ephemeral funds of the demo account are no longer put at risk, but their capital. This aspect is enough to make the trader more nervous and his trading results less consistent.
You've probably already read that getting rid of emotionalism is an essential part of becoming a successful trader. In any case, getting rid of any kind of emotion is an unattainable goal for any human being. Emotions in trading can cause poor decisions and results.
2. The demo account does not involve any risk
As already mentioned, your capital is not put at risk when working on the demo account. Regardless of the amount you could win or lose, the balance is represented only by a series of figures shown on the screen.
When you finally move to the real account, however, you may find yourself in a situation where you are afraid to make the right move – open a position at the right time or handle losses when that proves necessary – just for fear of losing your money. Wrong is normal, but the errors in the demo account do not have much weight.
3. Repeat the same bad habits
It is much easier to fall victim to one's bad habits in trading when working on the real account. Again, you are not as involved when trading on the demo account. As a result, it's harder to keep your mind clear when your money is at stake. It could be useful to replicate the same mistakes made at least once: move the stop loss when it is clear that it should be in place, forget the strategy of the trading plan in the middle of an operation.
What to do?
Now let's move on to the most important part. What should be done to eliminate the differences between the two types of accounts? The solution requires some mental gymnastics, but it is absolutely feasible. Try copying your mental state when you work on the demo account: focus on the process, not on the result. When you open an operation, do it at the right time and avoid mistakes that can be avoided. When you close an operation, be sure to do so by following your trading strategy, not following your emotions.
Another possibility is to keep a trading diary. Write down all information related to operations, including your emotional state and any errors. This will make it easier to eradicate unwanted behaviors over time.
This article does not represent an investment advice. Any reference to past movements or price levels is informative and based on external analyzes, we do not provide any guarantee that such movements or levels may reoccur in the future. In accordance with the requirements set by the European Securities and Markets Authority (ESMA), trading with binary and digital options is only available to customers categorized as professional clients.
GENERAL INFORMATION ON RISKS:
CFDs are complex instruments and carry the high risk of losing money quickly due to the leverage effect. 76% of retail investor accounts lose money when trading with CFD through this provider. You should make sure you understand how CFDs work and if you can afford to take the high risk of losing your money.
Source: IQOption blog 2018-11-06 10:49:47