A discussion was recently started on the Currensee discussion boards under the title "Did you trade much better with demo accounts?" The responses seen so far suggest that indeed is the case for most traders. Psychology is the noted difference, though there is the legitimate indication that real-world executions and related influences can be part of the story as demo platforms generally assume perfect liquidity and whatnot. I think the contributor responses in New Trader FAQs to the question "Is live trading different than demo trading?" are relevant here. Billy Williams puts it very well:
The difference between demo trading and live trading is much like what a jet pilot goes through initially.
A new pilot candidate will show up to flight school and learn all the inner workings of a jet, receive flight training, gain knowledge of the latest technological attributes of both the jet they will be piloting as well as the jet’s enemy counterpart, conduct flight training under supervised conditions, become familiar with the operation of the jet’s weapon systems, etc.
Then, the day comes when war is declared and there are no more training missions but only real live combat against a formidable enemy. If you're that pilot on that day when you first take off for your real live combat mission you may find that you have a touch of fear that can be felt deep in your gut, that you breathe a little deeper and faster, that your vision becomes sharper as you scan your radar for signs of the enemy or at the cloud formations around your squadron, that your reaction time is quicker than normal, and so forth.
Like the jet pilot in that scenario, you will find that once you actually have something at risk, and you are trading the market in real time, you too will realize you’re in new territory.
And, also like that pilot, if you have trained yourself well and in truly realistic circumstances with the best tools to give you the highest probability to succeed as well as protect yourself against the unexpected then you will find yourself a successful trader where it counts….in real-time trading.
Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.