Why do you make money trading on demo but not in real market? [Trading Q&A]

I got another question from a beginner trader.

'Why do I make money on demo and not on real?'

It is difficult to answer such a question without more information. Therefore, I will answer what is the most common cause of this situation.

1. First of all it might be unfamiliarity with the trading system. Need more testing, analysis of your actions and more work on… demo.

2. There is more courage on demo than in the real world. It is easier to make decisions. And if you have a problem here too - see point 1. Write down the rules of your trading system, prepare all the documents that will help you trade. Then, you need to test a lot, have a trade book, written down the rules of entry, management, exit, what kind of analysis you need to do, etc. You also need to work through some trades on a demo or simulator. All this in order not to have doubts and hesitation when entering the real market.

Next step in live trading. You must have a clear picture in your head if there is a signal or not. Then you enter with the smallest stakes the broker allows (because it is still a period of testing and refining the system).

The best traders (e.g. Joe Ross) even after many years often come back to demo - they check, test, observe. Only then they go live. Demo is not a shame, quite the opposite! It is a training ground.

PS. I recommend to look for solutions on your own. It builds knowledge and skills very solidly and quickly. The mind learns to automatically react to problems and find solutions.

I like how you mentioned that many traders have more courage on demo than in real life. Even if you learn about trading psychology, it doesn't really prepare you to deal with the rollercoaster of emotions that come with opening a live account. When demo money is on the line, it's easy to think clearly, follow your plan, analyze data, and make improvements. It's much different in the real world when your hard-earned money is on the line, or if you're presented with an opportunity where you think you can make a lot of money. I think demo accounts are an amazing tool, but they have some blind spots.

Thank you for your thoughts! Check out my profile for more, I post few times a week.

There are a few reasons why you might make money on a demo account but not in the real market.
 
One reason could be that you are taking on too much risk in the real market. When trading with real money, you have to be more careful and conservative with your trades.
 
Another reason could be that you are not used to the fast pace of the real market. In the demo account, you might have more time to make decisions, but in the real market, you have to act quickly and make decisions in a split second.
 
Lastly, your emotions can also explain why you might make money on a demo account but not in the real market. In the demo account, you might not feel as invested in your trades, so your emotions won't affect your trading decisions as much. Howeve, your emotions can affect your trading decisions when trading with real moneys.

AayushiShah posted:
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Thank you for your thoughts!

One of the reasons could be that you know it's a demo and no real money is involved, and with that assurance, you can trade with more confidence and positivity, whereas in live, you have created panic in your own mind, which could hinder your trading performance.

Demo does not have slippage but Live does. That can have a big impact on an account over time

The main reason imo is the lack of involvement of trading psychology in the demo account. Trading a live account needs good emotional stability without which traders are bound to lose.

Demo accounts provide a risk-free environment where traders can take chances, while live account traders are under pressure and may hesitate to risk their assets. If you lose in a demo, you won't lose real money. Real money losses can have a significant psychological impact, as you'll come to realise that this isn't just amusing diversion.

I think it all depends of the traders. Someone scares open real acc. Someone think it's too early open real one. Someone wants test his trading system more. So I think all of you above are right.

The name ‘’Forex’’ is a fear because maximum Forex traders losers from here. They lose due to their own faults and they are reluctant to maintaining any discipline of trading. They don ‘t seek for advice from mentors or senior traders rather they are surrounded by greed and over-expectations.

Masticate posted:
When we trade in a demo account, we learn everything except for how to control emotions.

Absolutely! That's the best summary of the issue.

It is very important to learn on the system/strategy demo. Preferably to perfection. In this way, when trading live you will mainly be left with learning to control your emotions.

One experienced trader I interviewed mentioned to me that 90% of beginner traders' problems are insufficient knowledge of the system/strategy. And 90% of experienced traders' problems are related to emotions.

I believe the basic answer to that issue is that there are no external factors that you face when trading in demo mode as opposed to live. You are well aware that you are using virtual money to make a profit and loss in the demo, but when it comes to real money, you are beginning to be very cautious since you are about to put real money into trading and you do not want to afford the loss.

Piffling posted:
There is no comparison between demo trading and live trading. They may look the same on the surface level but they are not the same. Our mindset is different when we are risking real money. We struggle to control our emotions and end up losing the trades. But that’s how we learn as beginners in forex. So, we just need to focus more on emotional control and risk management to minimise the losses during the learning period.

I completely agree with you on this as, demo trading is just to make you learn about the various strategies to trade in forex but going live is totally different.

This is because there is no trading psychology involved in the demo account and we don't know how to control our emotions there, whereas trading on a live account requires good emotional stability and risk management strategy, which many traders overlook when trading.

Demo account is only for educational purposes and does not guarantee success on the live platform. Demo lacks in developing trading psychology which is the main reason why traders make money on the demo but are unable to make money on the live accounts.

One of the biggest reasons could be that some people can't perform well under pressure on live trading. That's why they fail to make money there.

Demo trading is a simulation of live trading. However, demo trading is simpler because it is more adaptable. Traders become stressed and fearful of losing money while trading on live accounts. It increases the likelihood of being defeated in the market.

Oh in addition to all your thoughts, and it correct I agree with you. But in addition to your thoughts, I would put a separate emphasis on the psychological readiness of the trader to move to a new level. Cause in the head of every beginner, this is a very large-scale and difficult decision. Therefore, make up your mind gentlemen traders. Decide to trade.