Does Trading With Virtual Money Help?
Many new traders start to trade with virtual money and surprisingly do well too. Then they start to trade using real money on Crypto Code using the same strategy and start to make gains as well as losses. Why does this happen when they have been using exactly the same strategy.
Trading is not just about strategy but also about controlling your emotions. When you trade with virtual money then you are able to develop a trading strategy. However, trading with virtual money does not let you test the emotional part of taking trades. And unfortunately, this is one of the biggest things that traders need to master to be successful in trading.
Emotions in trading
Most traders face losses even with the best of strategies. This is because they are not able to control emotions when trading. And when trading with real money it is here that the true emotions start to come up.
The two major emotions that traders have to deal with are fear and greed. Also when it comes to trading with real money most traders will freeze at the thought of pressing the trigger. Once in the trade, the trader needs to keep emotions aside and take the trade as it comes. This means that if it is a stop loss, they need to accept it and get out of the trade for a small loss. If it is a profit then this does not mean that the profit will keep going on forever. They need to take decisions and get out of the trades at some point.
All these can be tested only when the trader trades with real money.
Fear and greed
Traders have to deal with fear and greed almost on every trade. Fear is when they take a trade and it starts making a small profit and the trader gets out of the trade thinking that he may lose what he has gained. He does not wait for the trade to reach either the target or the stop loss price and this, in turn, causes the trader to cut short his profits.
Greed comes into the picture when traders want more and more from the market. They need to take the profits and get out of the trade. But in an up trending market traders feel that the market will never stop and thus they cling on to their trades and ultimately make a loss.
If you are just starting to trade, then trade with a small amount of capital. But it is recommended to not trade with virtual money but with real money.