Journal of trader UM (aka traderum) using Demo Acct

Hi,
I'm attempting at automating my trading strategy by writing a program that uses the C++ API of the broker.

In this stage I'll use an IB Demo account. The IB Demo is IMO very realistic and available 23.5 hours a day, 7 days a week,
ie. perfect for testing, even on weekends.
Only drawback of it is that the prices are with some unknown +/- offsets, but that's not that big a problem for testing purposes.
In this journal I'll post about my progress with coding and also about the trade results.

I'm daytrading mainly stocks and stock options, mainly on US exchanges, incl. foreign instruments listed there,
incl. UK and German titles. I'm usually holding a position several hours, most of the positions are closed intraday,
but It happens that sometimes I must hold a position longer than a day (usually max. 2 days).

Since in the IB Demo the account restarts every day anew with an initial acct value of 500k, sometimes one must do some
manual calculations when holding a position longer than a day; it's tedius and timeconsuming to do it manually
but unfortunately not always avoidable if one does not want close the position earlier with a loss.

I'll also not hide to mention that I already had started my journal at another web site similar to this site,
but had some unfair problems with the moderators there. Although I'm still a normal user there, I feel I'm unfair treated there,
so my desire to come here. I hope I'll have less problems and more success here. TIA.

BTW, my timezone is CET, I'm in Germany :cheesy:

Since in this Demo one can trade practically 24h/day I did my first trade today some minutes ago by selling short some SPY Call options. The timing was not optimal, but I'm hopefully that in the end it will be a winner.

BTW. I'm a trader who usually seldom gives up on a position.
Ie. I "walk the walk" till the bitter end, until I have reached my goal, with all consequences of course
It's a battle between me and the MM... I know the dirty tricks of the MMs very well, and because of this, I'm able to beat them.

By a "position" I mean the underlying instrument. To win the battle it is sometimes necessary to use many
positions for the same underlying (for example several option positions with different strikes etc.).

I'm currently deep in the reds, but that is "normal" with my kind of trading... So, nothing is lost yet

Oops... with options things change so fast: I'm in the greens!

I "feel" that the MM offers me to "close the position with no loss" (and about 1% gain), but hey, come on, that's nothing!
He will now play his usual psycho games to "convince" me of his offer... but I'm mentally strong and will reject his offer...

I'm again deep in the reds, but that's part of the said psycho games of the MM... Nothing to be concerned about...

Now I bought also some long Put options, additionally to the said shorted Calls...
Hmm. now both are in the reds...

Ok, this is going to be a very challenging trade... As said the timing was not optimal b/c I neglected to study the chart before entering the trade... one of my usual sins. I just trusted a scanner which unfortunately is not that perfect yet... :-(
But the adventure continues and the day is long...

Could I pls ask what the specific purpose of your demo trading is?

As an aside, I find your objectification of mkt-makers somewhat disturbing...

Martinghoul said:

Could I pls ask what the specific purpose of your demo trading is?
As an aside, I find your objectification of mkt-makers somewhat disturbing...

Click to expand...

As was written, I'm testing my method, training my trading skills, and testing my API app.

MMs are of course real, and part of the problems a trader always faces, but which he/she must overcome to be successful. MMs sometimes (mostly play very unfair, that's my own experience with them, but one still can win against them if one uses a good strategy and risk management.

But how can you test your method and trading skills with totally fake prices? Moreover, if you're testing your API, why would you care about whether your fake trades make or lose fake money? Shouldn't you concentrate on the coding and completely ignore whether your demo account is "deep in the reds"?

MMs might be real, but in deep liquid mkts, thinking of them the way you do is delusional, IMHO. Moreover, since you're trading under a demo account, you are dealing with 'fake' mkt-makers. Don't you think it's possible that real mkt-makers don't behave the way you're observing? And if that's the case, don't you think that you might have a problem in the real mkt, when/if you discover that your 'demo' experience has led you down the wrong path?

Martinghoul said:

But how can you test your method and trading skills with totally fake prices? Moreover, if you're testing your API, why would you care about whether your fake trades make or lose fake money? Shouldn't you concentrate on the coding and completely ignore whether your demo account is "deep in the reds"?

MMs might be real, but in deep liquid mkts, thinking of them the way you do is delusional, IMHO. Moreover, since you're trading under a demo account, you are dealing with 'fake' mkt-makers. Don't you think it's possible that real mkt-makers don't behave the way you're observing? And if that's the case, don't you think that you might have a problem in the real mkt, when/if you discover that your 'demo' experience has led you down the wrong path?

Click to expand...

The demo behaves very realistic. I think they use real mkt data, but for the user they add or subtract an offset to the prices.
No I don't think I'll have problems later in the real mkt, because if I can succeed in this really hostile and dangerous environment that is in the demo, then I'm sure I will master it in real trading very easily. IMO this demo is the best school and training one can find.
And: I already have experience as part-time retail trader in the real mkt, and I remember which problems I had faced then. The demo has opened my eyes, I now know how things behind the scenes work. With this demo I'm getting the best training one can ever get from anyone or any corp. or institution. I want to make the best use of it as I can, ie. training, training, training.

There's so many things wrong with your notions, I think it would be folly to attempt a meaningful discussion.

I wish you the best of luck, at any rate.

Back to my SPY positions: things turn to my favor, I'm even in the profit zone, no wait, let's say break-even... I of course will not close it until I make some bucks with it...

BTW, later I'll post a screenshot for verification (those who use the same demo can verify it, and also study the trades I made incl. the times etc).

Oh-oh... I'm now about 20% in plus in this cumulative investment, it means about $24k profit so far,
I think there is much more possible with these options... so I'll keep them some more time...

Too bad it again has changed direction, now again at about the break-even level...

Attached is a screenshot of the positions (still not closed yet).

Yes, true. The "paper trading" account is totally reliable, but don't call it "demo" account because it sounds like the "edemo" account, which is random data (or old real data, but used randomly), and which is also offered by IB for debugging in the weekends. By many things you mentioned it was clear to me that you were talking about the "paper trading" account, but you did call it "demo" account, which is equivocal because of how similar it is to "edemo" account.

Actually I just checked and I might even be wrong, as it seems to be called "demo account", even though until a few months ago the userid was "edemo":

http://www.interactivebrokers.com/en/p.php?f=tws&p=d&ib_entity=llc

Ok, I just checked this as well, and this is how it recently evolved:
http://individuals.interactivebrokers.com/en/software/demoStandalone.php?ib_entity=llc

Live Installed TWS Demo
Instructions on how to run installed TWS in demo mode:

1.Download IB Trader Workstation(SM) and follow instructions therein.
2.When prompted for username and password
For Individual Demo
User Name: edemo
Password: demouser
For Advisor Demo
User Name: fdemo
Password: demouser

Click to expand...

As you can see, titling the thread "demo account" was misleading, because you're actually talking about the "paper trading" account.

Ok, my SPY adventure so far didn't work the way I had expected :-(
I'm in the negatives (about -10% of IAV).
But I'm not willing to give up, not a single cent I will give to the MM, I promise!
This adventure continues tomorrow...

travis said:

As you can see, titling the thread "demo account" was misleading, because you're actually talking about the "paper trading" account.

Click to expand...

Dunno, it's somehow mysterious b/c for paper trading one normally must have a real acct first... but for which I haven't applied yet... as said: mysterious
IMHO it's not that important as long as it reflects, to some degree, the market behaviour...

As can be concluded from my writings so far, I'm a martingale type, a real risk-taker.
This is new with me, b/c I changed to this type only after gaining deep insight into how markets work, and especially learning how MMs do, operate, and their role etc. I did also some important math studies which support this theory of mine.

I would say this: one should never accept to lose any single cent, instead one should fight a trading battle by using all of the available capital in a strategic manner (this of course does not mean one should use the whole capital in just one single order). It's called "averaging-down" etc.
As long as you have not realized the loss (ie. by closing the position), nothing is lost yet. Even if you are fully invested and still in the negatives then better wait some more time instead of taking a loss.

That's my (new) way of thinking and trading, your mileage may vary of course.
At least with volatile stocks and options this worked good for me so far.
But one must be prepared to also accept situtations where one is deep in the negatives, for example -30% for the position, or even more... (especially when trading options)... As said, this is only the "unrealized PnL", as long as you don't close the position nothing is lost yet...

But it is important to have a probabilistic edge when opening a trade, ie. the mkt price should be deep down when opening a long position, and vice-versa... Taking a look on the chart should answer this question quickly (as noted, I unfortunately violated this my own rule yesterday with SPY, but as said nothing is lost yet).

traderum said:

Dunno, it's somehow mysterious b/c for paper trading one normally must have a real acct first... but for which I haven't applied yet... as said: mysterious
IMHO it's not that important as long as it reflects, to some degree, the market behaviour...

Click to expand...

Ah, ok, well then the other post by that fellow might have a better point than I thought. If this is indeed the "demo" account, it's not as reliable as the "paper trading". And then I was wrong about the title being "misleading", because the title is correct.

If you have any questions about these accounts, let me know, because I can use and have used both. For one thing, I thought the "demo" ("edemo" userid) account was only available during weekends, so maybe I do not that much about these accounts after all. Or maybe things are changing. IB's web site has changed a lot in just a few days (I don't like it - it got too complicated, confusing and with too much stuff and too many colors).

Todays trading looks good so far: about +12% of IAV (500k).

The positions of yesterday still not "resolved", it simply needs some more time.

But I found the reason why my scanner yesterday gave me a wrong entry timing... Bug in the data!
Those data bugs are really the death for any automated trading. I think 'they' do it intentionally...

Imagine these data error cases:
1) LastPrice does not update, only Bid and Ask update
2) LastPrice and Bid do not update, only Ask updates
3) LastPrice and Ask do not update, only Bid updates
... there are 8 possibilities for 3 items: 2^3=8
And you must take care in your program for all these possibilities... :-(((
Murphy's Law is true.

traderum said:

As can be concluded from my writings so far, I'm a martingale type, a real risk-taker.
This is new with me, b/c I changed to this type only after gaining deep insight into how markets work, and especially learning how MMs do, operate, and their role etc. I did also some important math studies which support this theory of mine.

I would say this: one should never accept to lose any single cent, instead one should fight a trading battle by using all of the available capital in a strategic manner (this of course does not mean one should use the whole capital in just one single order). It's called "averaging-down" etc.
As long as you have not realized the loss (ie. by closing the position), nothing is lost yet. Even if you are fully invested and still in the negatives then better wait some more time instead of taking a loss.

That's my (new) way of thinking and trading, your mileage may vary of course.
At least with volatile stocks and options this worked good for me so far.
But one must be prepared to also accept situtations where one is deep in the negatives, for example -30% for the position, or even more... (especially when trading options)... As said, this is only the "unrealized PnL", as long as you don't close the position nothing is lost yet...

Click to expand...

This is one of the funniest, most ironic things I have heard on any forum ever!!! Seriously, the drivel you spout is totally beyond belief!

I especially love 'the real risk-taker' bit, coming from someone who trades a demo account. Priceless!

Martinghoul said:

This is one of the funniest, most ironic things I have heard on any forum ever!!! Seriously, the drivel you spout is totally beyond belief!
I especially love 'the real risk-taker' bit, coming from someone who trades a demo account. Priceless!

Click to expand...

Hello Martinghoul,

I stand by what I wrote. I have become a risk-taker only after intensive training with the demo.

But, I kindly want to remind you of your own posting regarding my other thoughts I wrote in my journal:
http://www.trade2win.com/boards/tra...aka-traderum-using-demo-acct.html#post1011466

FYI: this is a journal, not neccessarily a discussion group. If you don't like my writings then simply don't read.

I have the feeling that you are trying to create problems, but I'm not interested in any problems.

I'm sorry to say this, but IMHO you better should try to participate in other forums/threads/journals etc.

Thank you for your cooperation.

Cheers,
traderum

Regarding yesterdays positions: one of them (of total 4 positions, all are different SPY options)
has been filled some minutes ago (made a screenshot of the Time&Sales data).
3 more to go

Why would an options daytrader who wants to go long with an instrument sell Puts of it?
Why not simply buy Calls instead?
Anybody can answer this?
I do it mainly to confuse the MM Because he doesn't expect this. But there are some more reasons...