Demo Trading is one of the most important phases of anyone’s trading career. A trader should be able to learn the basics of trading, derive a viable strategy, effectively use stop losses, understand leverage ratios and manage to make consistent profits. When a trader is confident enough about his trading skills, he can make the switch to live trading to make some real profits. If you are a trader who has just started out you ought to know that demo trading and live trading are not the same. Here are 5 key differences between demo trading and live trading:

1. VIRTUAL VERSUS REAL MONEY

In a demo trading account, you usually trade with virtual money you get at the beginning when you sign up. Since it’s virtual money, it really does not matter how much you lose or earn unless you learn something out of that trade.

However, when you start to trade live, it is your hard-earned money you are trading with. Every penny matters. So you have to be more careful with every decision you take whether it be entering into a position or setting a stop loss.

2. REAL AGAINST IMAGINARY RISK

You would not have known what risk is until you have started to trade live. While trading with a demo account, you would be least concerned about the number of trades you lose. Your views on trading strategies and their importance will be theoretical. All you want to do is try a various number of methods in order to examine with which ones you can earn profits.

But when it comes to live trading, you will understand the implications of the inherent risk as and when you start to lose trades and feel money slipping out of your hands. Every slight change in the market could be a risk if not noticed and analyzed properly.

3. TRIAL & ERROR AS OPPOSED TO ACTUAL TRADING

A trader should take decisions based on his/her emotions. Even if your virtual money gets completely depleted, you have options to refill. But when it’s real, that would be the end of your trading career. In the first case, why would you have to be emotionally depressed if you are expert enough to time your trades accurately and execute them well? In spite of all the hard work if something does not come out well, remain calm and wait for the next perfect opportunity.

4. REAL AS OPPOSED TO SIMULATED GAINS

If you are making back-to-back profits in your demo account, it might be due to several external factors. This may also be a technique to make you feel confident and right about your trading techniques & methods. You cannot expect the same to happen when you trade live. It’s the real market out there waiting to test you in every possible way. So do not feel too confident about yourself. Keep revising your strategies and do not expect a string of profits in a row.

5. PRACTICE VERSUS A REAL SETTING

You might not experience any stress or pressure to make every trade successful when you are trading via a demo account. But when you start to trade live, you become obsessed with money and start to overtrade which could be detrimental to your trading career. So don’t take a lot of pressure on you. Go with the flow of the market and profits will follow.

Understand and accept the fact that demo trading and live trading aren’t the same. You will face initial loses when you switch from demo trading to live but don’t lose heart. Work on your strategies and control your emotions to make some real profits!