Whether you are just starting your investment journey or perhaps looking at execution-only services in different markets, there will be a virtual trading site to suit your needs. These virtual trading sites are now more complex than their historic counterparts, offering trade execution using real-time prices. However, does virtual trading prepare you for real trading?

 

Patience is the key to trade execution

No matter how focused you may be, there is a vast difference between real trading and virtual trade execution. Many people start with the correct attitude when using virtual trading platforms, but sometimes they will lose patience. It would help if you got yourself in the mindset of an execution-only trader, someone doing their own research, deciding when to buy and sell and taking responsibility.

Even though many execution-only traders will liquidate positions to reinvest immediately, this is not always the right move. So instead, use the virtual trading platform to build that patience, that ability to hold back and not rush in.

 

Run your winners, cut your losers

Even with a virtual trading platform, the trade execution process is precisely the same, so you will experience the joy of winning and the despair of losing (to a certain extent). While nothing will prepare you for life as a full/part-time execution-only trader, use your virtual money to create a simple mindset. Run your winners, maybe increase your stop-loss limit along the way, and cut your losers when they crash through your stop-loss limit. Surely that makes common sense?

Once you start trading in the real world, using your own money and feeling the pressures of trade execution and fast-moving markets, you may feel differently. Unfortunately, human nature suggests that many people will do the exact opposite of what is needed. The fear of seeing a paper profit fall by the wayside will see many people selling far too early. Due to a mixture of ego and hope, some traders will run their losers because “you were right, and the market was wrong”. This is the quickest way to a short-term career as an execution-only trader!

 

Appreciating the wider market

Market sentiment is best described in two simple terms, de-risking and increased risk. In challenging markets, investor appetite for risk will reduce, leading to significant falls in volatile sectors such as technology. Conversely, in the good times, an increased appetite for risk/potentially high rewards can lead to sectors such as technology outperforming the broader market. So, you may pick the right sector, the right stock and even the right time to buy, but if the broader market turns against you (market sentiment), you will struggle to stand still.

This is why execution-only short-term/day traders constantly adjust their targets and stop-loss limits. You need to learn to appreciate the broader market and the impact this can have on individual sectors. What better way to do this than in real-time with virtual money?

 

Maintaining that focus in the real world

Many short-term traders have benefited from virtual trading platforms based on real markets and real-time prices. Virtual execution-only services allow you to adapt and hone your skills, ready to move to real-time real money investing. While switching to a real-time execution-only trader, you must retain the focus, strategies, and experience from your virtual trading days. 

Trade execution is not an exact science; it takes time and thought, and you need as little outside interference as possible. Consequently, only deal with funds you can afford to lose, and if there are timescales, it may be best not to invest. For example, if you need to raise funds to pay for a big-ticket item next week, this will place added pressure on your shoulders. 

Focusing on the market and the feel of real trading is essential while retaining the lessons from virtual trading. Easier said than done!

 

Summary

There is a huge difference between virtual trading and trading with your own funds, but this doesn’t mean that virtual trading platforms are meaningless. Use them to hone your skills, and gather that vital experience but remember to retain this when you switch to real-time trading with your own funds.
 

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