Demo Trading simulates real market conditions without risking actual money. Most brokers offer demo accounts funded with virtual capital, allowing traders to experiment with strategies, familiarize themselves with platforms, and develop skills without emotional stress. This risk-free environment is invaluable for beginners to practice executing trades and managing positions. 

However, demo trading has limitations. The lack of real money can lead to overconfidence, as traders may not feel the emotional pressure of live trading. While it’s a valuable learning tool, it doesn’t fully prepare traders for the psychological aspects of trading with real capital. 

Live Trading, in contrast, involves using real money and experiencing genuine market dynamics. This mode exposes traders to the emotional highs and lows of trading, teaching them to manage feelings like fear and greed under pressure. A robust risk management strategy becomes essential, including stop-loss orders and proper position sizing, to mitigate potential losses. 

Transitioning from demo to live trading should be gradual. Starting with smaller position sizes can help minimize risk while building confidence. As traders gain experience, they can increase their position sizes and take on more significant trades.