A demo account and a real account may look exactly the same on the trading platform, charts and execution, however, the experience and the emotions are light years apart.

In a demo account, the trader uses virtual money and is able to practice the strategies learnt at no risk to their finances and develop experience in how the market works without fear of losing money. Because of this protection, the trader will be lulled into a false sense of security and will take bigger positions and risks than they might take with real money.

 When they suddenly switch to a real, live account, everything changes immediately; now, every movement they make in the market counts for real money, be it up or down. Fears and emotions like desire, hesitation, stress, and greed can easily take over rational thinking and take priority over the individual trading strategy.

For this reason, traders frequently find themselves taking profits much too early, holding on to losing trades in loss aversion fashion, or over-leveraging after winning a number of trades in a row. In other words, the only difference between the demo account and the real account is emotional attachment. Demo money does not seem real; live money does become personal and then emotions and biases play a bigger role.

To mitigate some of the emotion being introduced, traders should be encouraged to take demo trading seriously with realistic position size, to transition gently into small live trades, and develop emotional discipline through journaling and risk management. In summary, demo accounts are an important way to learn but trading real money is the true test.