7 min read
Have you ever had the impression that when you trade on your learning account, everything is fine? The result of the transactions is satisfactory and your balance increases regularly. It seems much easier to get a positive result and the losses are insignificant. Why is this so when you trade on the learning account without having invested any real funds? Here are the three main differences between the learning account and the actual balance.
The learning account is free
This is probably the most obvious explanation, but it is true. When a trader's trades are made with free funds, it is extremely easy to ignore losses and only pay attention to the amount of the gain. The fact that the learning account can be replenished as many times as needed means that any mistakes made by the trader don't matter, since it operates with an unlimited amount of virtual cash.
It takes mental effort to be as careful with learning account funds as it does with real money. The only difference between the accounts is that the money in the demo account is virtual – it cannot be withdrawn. Since the charts are identical (all quotes are the same), the odds of losing or winning are the same for both types of accounts; however, real account losses include your actual invested capital and your real money.
The learning account works with large amounts
When you trade on the Learning Account, the investments you make most likely number in the hundreds or thousands of dollars. When the investment amounts are this large, in the event that the deal ends in the money, the return will most likely be substantial as well. Transactions involving large amounts bring satisfaction and a sense of accomplishment, even if the funds are not real. This is how our brain works: we are able to receive as much pleasure from simulation as from reality.
One possible solution to this problem is to invest small amounts and write down the trading results when you practice. This will give you an idea of how much money you are spending and the actual returns.
Trading with real funds arouses strong emotions
It is easy to notice that when you trade with the demo account, you don't feel any fear. There is nothing scary about losing money that can be replenished immediately. However, when it comes to your own hard-earned funds, every trade is associated with uncertainty, the fear of losing and greed, the desire to earn more. The real account does not give a second chance. In the event of an unprofitable transaction, funds are lost. This results in irrational behavior which affects the way the trader thinks and, therefore, the results of transactions.
It is quite difficult, but not impossible, to avoid strong emotions. A good way to deal with them and deal with irrational behavior is to write down each step. It could be the parameters of the transaction (amount of investment, opening and closing price, time, assets, etc.), the risk management approach, anything you consider as valid and which must be taken into account before placing an order. It can help reduce pressure and help you concentrate better.
The biggest difference between trading on the learning account and the real account is the trader's approach, which is usually oblivious. One way to manage results on real and virtual accounts is to trade rationally and analyze the results. Do you notice a difference in your transactions on the different accounts? How do you deal with your emotions? Let us know in the comments below.
Source: IQOption blog (blog.iqoption.com) 2020-09-30 16:00:04
Article has been translated for informational and promotional purposes. Translations may not be correct and may contain errors we are not responsible for. Please note this article has been translated by using artificial intelligence. If you are having problems to understand article please refer to original article from IQOption blog.