Playing in tournaments is quite different from playing practice matches. Here are three reasons for this. First, the playing conditions are generally different than you are used to - different tables, balls, floors, backgrounds, and lighting. Second, you are usually playing different players, while in practice you often play the same players over and over. And third, there's far more pressure in a tournament match than in a practice match. (There are other, lesser reasons - traveling, time zone changes, eating different foods, etc.)
To overcome these three hurdles a player needs to become "Tournament Tough." How do you do this? By playing in tournaments!
By playing lots of tournaments you get used to different playing conditions, different opponents, and the pressures of tournament play. In fact, players who are tournament tough often play better in tournaments - they rise to the occasion, and play their best play, while not-so-tournament-tough opponents do not, and the contrast is often pretty blatant. How many players have you seen beat everyone in practice, but turn around and lose in tournaments? It's not the exception; it's the norm.
There are ways you can help develop your tournament toughness outside of tournaments. First, you can choose tournaments with varied conditions so you can get used to playing in any conditions. If you play in a club with perfect conditions, and only play there, then you'll be fine in tournaments with perfect conditions. In the large majority of major tournaments you'll have a problem as perfect conditions aren't so common. So get used to playing on slippery floors, poor lighting, distracting backgrounds, and tables and balls that might not meet your approval.
Play lots of different players in practice so you'll be ready for lots of different players in tournaments. Often the best thing you can do is play practice matches with weaker players with weird styles - not so you can learn to play that specific weird style, but to learn to adjust to different styles.
Finally, we get to tournament pressure. There simply isn't anything in practice like it. You'll feel it early in the tournament, and it'll only get worse as you reach the final rounds of an event you badly want to win.
I once coached a kid in the final of an age event at the Junior Nationals. (I think it was Under 12.) The kid had been training for years and was one of the top two players of his age in the country. But before the final he was incredibly nervous. I asked why, and he said it was the first time in his life he'd been in a final. How had this happened? He and his parents had always kept him out of rating and age events where he was a top seed to protect his rating, and so he had never really played in events where he was competitive, and so never was in a final. They only wanted him to play stronger players. And so he was a nervous wreck, and got clobbered in the final against a player he might have beaten - in a practice match. But he didn't have the "tournament toughness" to win a big match.
What can you learn from this? You need to play competitive events and learn how to win events. This means playing in age and rating events where you are among the top seeds.
This brings up a question that's been raised a lot over the years. Should under-rated players play in rating events they are eligible for, even if they are better than the cut-off? Definitely. It is irrelevant if you think your level of play is over the rating cutoff. At the U.S. Open, U.S. Nationals, or other large tournaments, you have to play a lot better than the rating cutoff to win, so usually being a lot better than the rating cutoff merely makes you competitive. Plus, who are you to say your level is better than the cutoff until you have proved so in a tournament? And finally, you need the competition. How can you be at your best in a big match until you have this big match experience? How can you get this big match experience if you avoid events where you can reach the finals?
When a player trains very hard and improves a lot, he should have that one opportunity to win those events that he was struggling to win before. When he's finally reached the point where he's good enough to win the event, he should play the event, reap the reward for his hard work, and from battling through to win the event, gain the tournament toughness needed to win in ever higher events.