One of the important aspects when moving to a live trading account is to bear in mind the initial capital that you want to trade with (risked capital) and the relative leverage that you choose. If you look closely, most demo trading accounts starts with $5000 or more (unless you are able to or have been trading with demo funds that are more realistic and akin to what your real invested capital would have been).
Most traders often tend to make the mistake of trading with a demo account with starting funds of $100,000 and a leverage of 1:200 and end up trading with $500 and 1:400 leverage.
As you can see, whatever strategies or methods that have you managed to practice with a demo account, things change the moment the variables also change, which in this case happens to be lower capital and higher leverage.
It is therefore important that for traders who are really serious of making a profit from forex trading, you should always ensure that your demo account settings such as demo capital and leverage reflects the real funds that you intend to trade with at some point in the future.
Trading Emotions
Trading emotions tend to change when you switch from a demo environment to a real trading account. Regardless of how much one might argue that this is not true, at a subconscious level, you end up taking on more risk with a demo trading account than compared to trading with a forex live account.
Factors such as analysis paralysis, doubts on your existing positions and so on tend to play a greater role when real funds are involved.
The best way to overcome such emotions is to ensure that besides trading with the same conditions as you did on a demo account, you should also look towards being well confident and familiar with a trading system or strategy. This ensures that when real funds are involved or when trading in a live environment, you are better positioned to deal with emotions.
Market conditions
While most brokers now a day’s offer a near similar real time feed on a demo account, there are subtle differences when compared to a live account feed. One of the most common of these being the varying spreads that you might encounter when trading with an ECN forex broker for example. In real time, the spreads tend to widen or narrow depending on the time you are trading and the news information that is about to come out.
A demo trading account usually insulates the traders to these real time market conditions but they are hard to avoid once you are trading on a forex live trading account. Spreads, are therefore a factor to consider and bear in mind when trading on a live account during key economic releases.
While real forex trading is not vastly different from a demo environment, traders should realize that in most cases than not factors that are not actively recognized tend to play a role in trading decisions and ones that could determine the difference between a winning trade and a losing trade.
As a final sign off tip, traders are encouraged to maintain a demo trading account and a forex live trading account with similar settings (read as same equity and leverage) and simultaneously place positions on both the accounts (demo and real).
Within a few weeks and a couple of trades later, looking back at the performance of both the demo and real trading account will definitely reveal some interesting insights into your trading habits.
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