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Thread: Why demo performance is often better than live performance?

  1. #11 Collapse Post
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    REASONS WHY DEMO TRADING AND LIVE TRADING PERFORMANCES COULD DIFFER

    The reason for trading the demo trading account is for the trader to be able to gain some knowledge, skills and experience which he could use to earn profits in the forex market. Where this is not the case, the purpose of the demo trading account is defeated. The ideal scenario is that the forex trader should be able to repeat his demo practice trading results in the real live money trading. But is clearly seen that what obtains in most cases is the opposite of this ideal scenario. One now wonder why so many forex traders seem to perform exceedingly good in the demo trading account while such feats could not be duplicated in the real live money trading. Reasons for this difference in demo trading results and live trading results include the following.

    1. CAPITAL SIZE: Most forex brokerage firms offer demo trading accounts with huge capital. Such huge capital allows the trader to keep adding to his trades when trading and since price will never keep going in the same direction forever, there comes a time price reverses and the trades go into net profit. But in the real live trading, the trader could not afford the capital size he traded in the demo hence will be lured into opening huge lot sizes which crashes the account fast.

    2. DISREGARD OF TRADING RULES: Most traders trade the demo trading account without applying the necessary rules of good forex trading. Hence when a direction is wrong, they keep opening trades in the same direction.

    3. DEMO TRADING INVOLVES VIRTUAL MONEY: Since the demo trading account is not a real money account, most forex traders trade it without care. But in as situation where they get into the real live money account where they have their own personal money involved to become afraid and would come out of winning trades so fast while they hold on to losing trades too long. This is also a reason that could account for the differences in demo trading results and live money trading results.

    4. OPPORTUNITY TO ABANDON A PREVIOUS DEMO ACCOUNT AND OPEN A NEW ONE: Most times forex traders abandon a demo account where they had made lots of losses. They open a new demo account where they might get lucky and earn good profits. Such opportunities are not possible in the real live money trading account. Hence the "lucky account" thing is not possible in the real money trading.

    5. EMOTIONS DIFFER: When trading the demo trading account, the forex trader is not risking any money so he acts and trades anyhow. But in the case of the real live money trading, his hard-earned money is at stake. Hence emotions take control of the forex trader when trading the live money account. This a very important reason when the trading results and performance differs.

    THE RIGHT WAY TO GO IN THE DEMO TRADING

    To really be in a situation where one could be in the position to duplicate ones demo-trading performance in the real live trading, the forex trader will need to check the following areas.

    1. Use a demo trading account with the same size of capital that will be invested in the real live trading.
    2. Trade the demo trading account with seriousness the same way you will trade the real live money account. This helps build the right type of discipline, skills and experience.
    3. The forex trader must apply all the necessary rules of good forex trading, setting the stop loss and target profits to each and every trade. The use of good money and risk management must never be ignored.
    4. Learn from whatever trading results one has in the event of trading the demo. Learn not to repeat the trading situations that lead to losses as well as the trading situations that lead to winning trades.
    5. Be disciplined as this helps in following trading plans to the end.

    When these steps are followed, the forex trader will be in a position to duplicate his demo trading performance in the real live money trading.
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  3. #12 Collapse Post
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    Why demo performance might not be possible in the live account?

    The demo trading account is a practice account which does not involve real money. Since the demo account is funded with unreal money, the care that normally follows real money trading is not present when trading the demo account. But with real money at stake the forex trader becomes more vigilant. So the resultant effect is that where the trader performed exceedingly good in the demo trading account, he could not do the same in the real trading account which involves real money either deposited by himself or funded by a forex broker in the form of a trading bonus.
    Reasons for failing to perform like in the demo with the real account
    1. Careless use of the demo account: Most forex traders use the demo account carelessly because they are not risking any money in the demo trading. You will see some leave a trade for several days because they forget to close the trade and not because they want to trade as a long term trader. So when they eventually come back to the trading platform if they are lucky they discover the trade is in profit. But when the same trader is trading with his own funded money or a broker funded money, he is serious and will not leave the trade in forgetfulness. Now he fears to leave the trade too long and might close the trade in loss.
    2. Use of big lot/volume: When the trader is trading with demo account he most times use very high lots to place trades. The use of high lot is made more possible because the money funded in the demo trading account is big money. Even when the trade is running in loss there is more money to keep opening new positions. When more and more positions are added the possibility of the trade eventually turning to profit is high. But in the real money account, the trader though he still use high lot now have a problem because his money is not much like he has in the demo. So when his trade is not going as expected, there is a high loss involved. And also, he has no free margin to open more trades like he used to do in the demo trading account.
    3. Big capital in demo account: Demo accounts get funded with big capital and this makes it possible for the trader to open several trades without fear. But when the real money trading is in progress, the same trader is in fear because he has limited capital. This is a good reason he can not get the same result in his trading like when he trade in the demo account.
    4. Lack of emotional involvement in demo trading: Because the forex trader is not risking any money while trading the demo trading account, he is not emotionally attached to the trades. But when trading his own deposited account or a forex broker's funded account, he realizes that he is risking real money and therefore becomes emotionally attached to the trades. His emotions places fear, greed, lack of control on him which makes successful trading impossible.
    If the forex trader will be able to get the same successful performance he gets in the demo trading account on his real money account, he must be serious when trading the demo. He must trade the demo like real money. He must also not just open a demo with big capital but with an equal amount of capital he will invest in the real trading account. When these steps are taken with seriousness and discipline, the forex trader should be able to perform as much as he performed in the real live trading.
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