Why Live Trading vs Demo Trading?

You looked excellent on the demo account, but as soon as you joined a live account, you started losing money. Many traders who have used demo accounts can relate to this issue. Almost every day trader goes through a phase where they appear to lose their way between demo and actual trading.

In this article, we’ll explain a demo account and help people understand why trading with live accounts is better than a demo account.

What is a demo account?

A demo account simulates a trading environment without putting actual money at risk. When you establish a demo account, you will be given virtual money that you can use to demo-trade, practice your trading abilities, become acquainted with the trading platform, and gain first-hand experience with the dynamic world of financial markets.

Demo accounts can include $10,000 or $100,000 in virtual money that can be used to experiment with the financial market without risking real money. This is also one of the biggest downsides of demo accounts, as traders have no emotional attachment to their demo funds.

What you need to know about demo trading.

Demo accounts are one way for a beginner to become familiar with the trading platform. You should use the demo to learn about the platform and become acquainted with the requirements for carrying out your actions.

Many people believe that using a demo account to practice trading is the best way to achieve success. No, it doesn’t. If you want to earn money by trading in a live account, you must trade with real money.

Why is demo trading different?

In practice, results obtained from trading in a demo account might differ significantly from actual live trading outcomes, usually due to the lack of a real money commitment. Even if a trader does exceptionally well on a demo account, their performance on a live account can differ significantly. In general, this phenomenon occurs because when your funds are at stake, you frequently have a different trading mindset than when dealing with virtual money.

What are the differences?

There are often significant differences in trade execution between demo and live accounts. Emotions are the primary reason why you may trade better on a demo account than on a live account. When real money is at stake in live markets, emotions are sure to come into play. But other than that, here are a few other examples:

• Demo accounts often execute stop losses at the exact price you put the stop loss at, regardless of whether you could have gotten out at that price.

• Typically, demo accounts do not replicate slippage.

• Partial fills are often not simulated in demo accounts.

• The demo account may not take into account the details of your broker agreement.

• Demo trading is faster and is not affected by factors such as increasing spreads or new events.

Demo trading will not provide you with a true experience because the primary aspects, including spreads, late fills, psychological pressures, and platform issues, are not experienced.

What you can’t do on demo accounts?

1. On a demo account, you cannot validate your trading strategy or the profitability of your trading plan. It makes no difference how brilliant your results are on a demo account when you switch to a live trading account.
2. Demo trading can’t prepare you for live trading. Demo and real trading are two entirely separate things that have nothing to do with each other from a trading standpoint. Once you’ve gained some live trading experience, you’ll realize that the most difficult challenges a trader has aren’t linked to watching price and recognizing a trade, but are completely emotional and exist only because of the money involved.
3. Demo accounts cannot properly prepare you for losses. It enables you to build confidence and go to the live account more quickly. However, it can also give you the false impression that you can’t lose, which will, of course, lead to losses once you start placing real money into the live account.

Many traders would claim that the easiest way to get the best results from demo trading is to treat it like real money. But that is not possible. You can’t fool yourself. Subconsciously you will always know that you are trading in a demo account.

What should you do to practice your trading?

If your primary goal is to evaluate performance in actual market conditions, it is advisable to trade live with as little amount as possible. However, you may still utilize a demo to become acquainted with the platform first. 

You will understand that your actual practice begins when you go live. To make it work for you, begin with little amounts so that you do not lose more than you can afford to lose.

One of the best ways to trade live and practice your discipline is to join a prop firm. With as little as £147, you may begin live trading with $6,000 in real funds at FundYourFX. If that capital is not enough, there is also $15,000 capital and $30,000 to suit different types of traders. It is the perfect place to hone your skills because learning how to trade real money in live markets requires you to manage your emotional responses and follow the rules.

A prop firm is a great environment for you to stick to the rules. This is where you can learn about risk management and also control your emotions. If you do not experience these emotions when demo trading, you are not adequately ready for the live markets.

Why a direct funding prop firm is a better choice to be a better trader?

As previously said, demo trading serves no purpose other than to teach you how to utilize the platform. You are spending money to attempt to pass their challenge to receive genuine funds. But how certain are you that after paying the challenge fee, you will pass and profit? Demo trading might provide the illusion of success. You can succeed in the challenge but fail in the live trade. You would then have to pay for another challenge. Instead of a demo account, why not jump straight to a live account and learn to trade there? Learning about your mistakes in a live account with genuine emotions will most likely benefit you more.

In conclusion

You must put money at risk if you want to truly learn how to trade. Demo trading is easier compared to live trading. It can give the impression of accomplishment. And when it comes to real trading, you are completely unprepared. The key is to trade live accounts to learn while not losing a lot of money.