I have long been a proponent of new traders getting their feet wet in live trading as quickly as possible after they have developed the basic trade entry and management skills (albeit on a very small scale). My reason for that is the exposure to the prospect of real loss alters the psychology of things dramatically. This email I received is a very good example of that.
There isn’t really a question as such, although I suppose it is.
Its the mental attitude I’m finding difficult to resolve when I change from demo to live. Demo accounts I’ve doubled, live accounts I’ve lost to much money.
Someone said to me in an email its a case of just thinking your still on demo, I wish it was that easy. I feel its more a case of confidence in myself and sticking to my system rules no matter whether the trade goes against me or not. That’s the hardest part I think watching while it swings against you and hoping that you have allowed enough stop loss before it swings back, timing may be an area I’ll have to look into, dropping down onto a lower time frame possibly.
I’m definitely going to disagree with the advice this person received about “just thinking your still on demo”. That’s actually the reverse of what needs to be done, to my mind. Trading like you’re still on demo probably means acting in a riskier fashion than you can do trading live. You need to take the reverse view and trade demo like you would trade live. It’s not easy, though, to be sure. Trading real money and trading phony money will always be different. Demo trading is good for learning the ropes and testing strategies, but that’s about it.
Confidence is a big part of this all, as suggested by the emailer, and I definitely recommend giving a read to the Afraid to Trade? Build Your Trading Confidence post I wrote a little while back. It offers up some advice on how to build/re-build one’s confidence. For this particular person, one part of the equation could be trading smaller so that the swings that seem to be causing the strain aren’t quite so painful.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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