What to look out for when you switch to trading with real money
Practice accounts are the entry point for most traders on Trading 212. They allow people without experience to get a taste of the markets without taking on the risks of losing any money before they’re familiar with the platform. Getting to know the layout and setting out to explore with the mindset of a five-year old – “What does this button do?” – is always recommended before any deposits are made.
The whole experience of trading with a practice account can be compared to watching an engaging movie. You can be engrossed by it, it’s interesting dialogues, action sequences and the experience as a whole. But ultimately its all made-up, you’re sitting in a comfortable chair with popcorn and something to drink, while fictional characters scream around or are being shot at (granted, that’s similar to trading sometimes).
We have natural instincts geared towards assessing risk. Most of them are pretty basic – threats to our life, injuries and the like. As trading is primarily a mental exercise (although it does have its physical side) the risks that come from it are more complex and are perceived as secondary. Losing money is really understood once it actually happens – so trading with a practice account doesn’t really prepare you for the inevitable losses and how you should manage yourself when they happen.
These are the main differences between the two types of accounts. When practicing your approach is almost always to think that the worst thing that can happen is the loss of virtual money. Preparing for the actual worst case scenarios, alongside exploring your practice account is what will build up your readiness for depositing.
Here are several tips on how to make a smooth transition from practice to real account:
- trade with money you can afford to lose (part of our money management basics)
- start at a slow pace, compared to what you have achieved in demo
- prepare yourself mentally for the mistakes that are only common for real-money trading, acquaint yourself with them
There is a small percentage of traders who jump right in with real accounts, but fairly small ones. They then proceed to learn the ropes in a more dangerous environment, but with an incentivised approach to the whole trial and error thing.
Overall we recommend to always start with a demo account. Knowing how your trading platform is the foundation on which any good trader steps on to achieve his/her targets. But don’t expect it to be absolutely the same when you deposit real money in your account – it will be a different you behind the keyboard.