Why Different Results Are Achieved Through Demo and Live Accounts

Why Different Results Are Achieved Through Demo and Live Accounts

Submitted by adil on Thu, 11/13/2014 - 08:15

Most of the traders feel cheated when the live trading results are not as good as the results they experienced trading with demo accounts with the same broker. Apart from some incidents when the broker is really scamming and manipulates results, the difference in results is quite normal and there are many reasons to that.

What causes the difference in results achieved by demo and live accounts?

Difference caused by execution issues: There can be many such causes including:

FOREX brokers usually never re-quote prices in demo trading. But re-quoting prices is very common in live trading.

The price feed and spread margins can be more stable and convenient for demo accounts to increase profit margins. The same parameters can be more erratic in case of live trading.

Stop loss orders may happen very quickly in demo accounts without any delay. But due to high volume and greater processing time in live trading, slippage may occur which can cause losses.

In living trading, errors occur in broker platform that can lead to loss of time, money and energy before the issue is resolved. Traders never experience such problems during live trading.

Some brokers do not provide their live trading platform to demo account traders. So the traders may need to readjust to the live trading platform and results will vary.

Difference caused due to trader behavior: The different circumstances in live and demo trading can lead to different trader behaviors which can also affect the results:

There is no money at stack in demo trading which means no stress. The trader can trade freely without any kind of pressure and may get very positive results. On the contrary, live trading has direct risk to trader’s money and the pressure can get to him.

There are no real consequences during demo trading if the trader makes some mistake in following his trading strategy. It can lead bad discipline and lack of focus which will have serious consequences in during live trading.

The trader can have a wrong impression about the whole trading system when using the demo account. The trader may wrongly perceive the risks severity or may not understand what trading frequency is the best for him. All such details need to be ironed out to be successful in live trading.

Are there any real benefits of trying a demo account?

Live trading is all about handling pressure, stress well enough to find opportunities and profit from them, all of that as quickly as possible. Demo trading doesn’t provide a suitable environment to test or hone your skills needed for the real trading.

Demo accounts are only useful to newbie who have never done online trading before and want a firsthand experience without putting their money at risk.

Do you have a choice? Is there any alternative? A better option perhaps?

For traders who want to feel the real trading environment without putting all their money at risk, ask the broker if they provide micro trading accounts. These special accounts have predefined limit tabs which will help you avoid losing too much money. You also may not be able to make profits beyond a limit, but the trading environment will be worth experiencing.