Transitioning from Demo Trading to Live Trading

Introduction

The transition from demo trading to live trading is a challenge for most new traders. After achieving success in a demo trading account, they start losing money as soon as they open a real trading account. What happened? In this article, we will explore some potential reasons for these losses and how to return to success in live trading.

Possible Reasons for Losses

1. It’s Natural

Don’t put extra pressure on yourself. What you are experiencing is normal. There is greater pressure when real money is at stake; there is no pressure when you were trading in a demo account. A turbulent live trading period for a few weeks or even months is common and natural. It’s just another step on your journey to becoming a successful trader. If it were easy, everyone would be able to do it, and of course, that’s not the case. Only those who endure hardships become successful traders.

2. Changing Market Conditions

The transition from demo trading to live trading becomes more difficult if the demo trading period is relatively short. Market conditions are constantly changing, so if you spent only a month or two in a demo account, it’s unlikely that the trader is prepared to handle the different conditions that the markets might present.

Let’s say a trader has been trading in a demo account during a period of high market volatility. They become accustomed to large movements and begin to anticipate them. Their strategy performs well in the demo account under high volatility conditions. So the trader opens a real trading account. The degree of market volatility decreases, but the trader still assumes that every trade will result in significant price fluctuations. However, these large movements do not occur, and the trader’s account is eroded by losses. The trader failed to adapt to the new conditions that the market presented.

The same situation can occur for a trader who trades in a demo account under slow market conditions, but when they open a real account, the conditions are volatile. Since they did not practice in this environment, they are unlikely to replicate their demo trading success in the live market.

If you are struggling after transitioning to live trading, think about whether you have prepared yourself for all types of market conditions. Day traders need to know when to trade and when not to trade (based on their trading plan) in trending markets, sideways markets, volatile markets, stubborn markets, and slow-moving markets. If you do not know how to trade (or when not to trade) in all these conditions, live trading should be put on hold until you learn that.

3. The Psychological Element

There is a key difference between demo trading and live trading: fear. Anxiety or fear when trading affects how we view the market. In the demo account, you may have taken every trading signal you could find. In live trading, many traders begin to doubt every trade. Afraid of losing money, they convince themselves to stay away from many trades, leading to skewed trading results and making them a large part of the losing traders.

To become a successful trader in live trading, you must fully accept losing trades. Once you accept – on a deep belief level – that losses will happen, the fear will dissipate. The only way to overcome the fear of losing is to lose and realize that despite having losing trades, you can still be a profitable trader overall. When you start live trading, begin with the smallest possible position size. This way, the loss on each trade is small enough that you shouldn’t worry about it. Using a small position size, your trading decisions will not be affected by anxiety. Gradually increase the position size as you become more comfortable, eventually rising to 1% of your account on each trade.

Using

This approach starts by risking a very small amount so that you do not have any anxiety, but with wins and losses, you will build an internal belief structure that allows you to profit overall, even if a large percentage of your trades are losing.

Conclusion

The transition from demo trading to live trading should be simple, but it is often difficult. Ensure that you have practiced and have a plan for all market conditions. When trading in a real account, start with the smallest position size possible. This may seem like a step backward after trading larger positions in the demo account, but you cannot let anxiety affect your trading decisions. Over time, you will be able to increase the position size without it affecting your anxiety. Focus on these factors, and your transition to live trading is likely to be smoother.

Source: https://www.thebalancemoney.com/transitioning-from-demo-to-live-day-trading-1031432