Why Demo Trading Performance Better Than Actual One
Perhaps the most common question that novice traders ask themselves is “Why my demo trading performance is better than the actual one, even when I am trading with the same trading system and strategy?”
The most common cause for this is the change of your mind, not the system. With a demo trading account you are risk free, you can place orders of your wish, and can experiment a lot with your strategies. You will be much relaxed as not a penny from your pocket is at risk. But in actual trading atmosphere you will be so much timid. Most novice traders will be in defensive mood to track and protect every possible loss to your invested money, rather than tracking possible profiting possibilities. More over, he or she may be over careful in placing your orders and choosing order sizes.
The standard demo account size of $50,000 or so allows traders to manage their risks easily, which is not so possible with actual accounts – usually with lesser size. For most traders paper trading of instruments is like playing a computer game where they plays with their brain. But with actual money, the hormones take control over your trading. Novice trades often want to get out off trades, like a reflex action, when ever they sniff a bearish trend. Often in pressure they follow faulty analyses and calculations. In actual market condition, the greatest difference between an experienced trader and a novice trader is the “control over emotions”.
The most common cause for this is the change of your mind, not the system. With a demo trading account you are risk free, you can place orders of your wish, and can experiment a lot with your strategies. You will be much relaxed as not a penny from your pocket is at risk. But in actual trading atmosphere you will be so much timid. Most novice traders will be in defensive mood to track and protect every possible loss to your invested money, rather than tracking possible profiting possibilities. More over, he or she may be over careful in placing your orders and choosing order sizes.
The standard demo account size of $50,000 or so allows traders to manage their risks easily, which is not so possible with actual accounts – usually with lesser size. For most traders paper trading of instruments is like playing a computer game where they plays with their brain. But with actual money, the hormones take control over your trading. Novice trades often want to get out off trades, like a reflex action, when ever they sniff a bearish trend. Often in pressure they follow faulty analyses and calculations. In actual market condition, the greatest difference between an experienced trader and a novice trader is the “control over emotions”.
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posted by Daniel Pipitone at
12:46 AM 
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