Why you shouldn't demo trade

[Lee Shepherd]

Prop firms will put intern traders onto a simulator (well a Demo with realistic fills).

Once they can hit some consistency targets - they will be given live money to trade.

I find it odd that the OP says you are up against professionals and then say that you should go about it in a different way to those professionals.

There is nothing wrong with Demo trading. The best traders earned their accounts that way.

@DionysusToast

Proprietary houses are distinctively different from retail trading. If someone was playing with my money I too would put them on demo first. But the fact still remains, professionals do not demo trade - an intern is not a professional trader.

Professional athletes practice many many more hrs than they put into their real game.

got to practice your setups, over & over & over again till confident they have positive expectancy.

the PRACTICE some more.but treat the acct like REAL $!

full stop.

@piphoe

You are using good examples in a poor way, with respect. As a trader you need to practice self control, this can only be achieved by the use of your real hard earned cash. Demo is not practising or testing of your skills to accept losses and carry on working without emotion. Nor is playing with someone else's cash.

It takes less than an hour to master a trading platform, clicking the buy/sell button takes less than a heartbeat, making money is easy....... losing money is the difficult part, falling from grace is damaging, explaining to others and yourself that you have done your bo11ox can be unachievable and therefore we lie to others and ourselves. Handling the losses is the most important part of this business. Taking several hits and being able to carry on.

Lee

 

[barjon]

Here’s a route:

1. Hypothesis
2. Backtest to see if there’s potential
3. Forward test (demo) to see how it looks in real time
4. Go live with small size
5. Increase size

The results from 3 will inevitably be worse than from 2 because it’s much more difficult to pin the opportunities in real time than in hindsight. Demo is valid for this reason even though it won’t tell you much about the emotional side of trading.

Similarly, the results from 4 will be worse than from 3 because the emotional side has kicked in with real money down. Same between 4 and 5 because the emotional side is in with a vengeance.

 

[piphoe]

@DionysusToast

Proprietary houses are distinctively different from retail trading. If someone was playing with my money I too would put them on demo first. But the fact still remains, professionals do not demo trade - an intern is not a professional trader.



@piphoe

You are using good examples in a poor way, with respect. As a trader you need to practice self control, this can only be achieved by the use of your real hard earned cash. Demo is not practising or testing of your skills to accept losses and carry on working without emotion. Nor is playing with someone else's cash.

It takes less than an hour to master a trading platform, clicking the buy/sell button takes less than a heartbeat, making money is easy....... losing money is the difficult part, falling from grace is damaging, explaining to others and yourself that you have done your bo11ox can be unachievable and therefore we lie to others and ourselves. Handling the losses is the most important part of this business. Taking several hits and being able to carry on.

Lee

Lee, I agree with all you say here ...real $ on the line gets your attention like no other. Even nickles & dimes. But, imo demo is useful for testing, and esp when placing a total fictitious amount in the demo acct..like say $10K. Can teach about slippage & algos that all of sudden run other way in blink of an eye. That's all you "got to work with". When thats gone your busted out...(till you reload more fake $ )

 

[DionysusToast]

@DionysusToast

Proprietary houses are distinctively different from retail trading. If someone was playing with my money I too would put them on demo first. But the fact still remains, professionals do not demo trade - an intern is not a professional trader.



@piphoe

You are using good examples in a poor way, with respect. As a trader you need to practice self control, this can only be achieved by the use of your real hard earned cash. Demo is not practising or testing of your skills to accept losses and carry on working without emotion. Nor is playing with someone else's cash.

It takes less than an hour to master a trading platform, clicking the buy/sell button takes less than a heartbeat, making money is easy....... losing money is the difficult part, falling from grace is damaging, explaining to others and yourself that you have done your bo11ox can be unachievable and therefore we lie to others and ourselves. Handling the losses is the most important part of this business. Taking several hits and being able to carry on.

Lee

The term 'professional' is generally used to describe someone that gets paid to do something. As such, intern traders are professionals that work in a professional environment.

The traders here are more like interns than seasoned professionals with live accounts though.

Or are you saying that your typical T2W trader should actually be compared to a pro that has earned their live account?

It actually takes a higher degree of self-control to consistently demo trade. You can reset a demo account and that is the real failing of traders using them.

There is nothing wrong with demo trading - otherwise it would not be used in the professional world.

 

[Lee Shepherd]

1) The term 'professional' is generally used to describe someone that gets paid to do something. As such, intern traders are professionals that work in a professional environment.

2) The traders here are more like interns than seasoned professionals with live accounts though.

3) Or are you saying that your typical T2W trader should actually be compared to a pro that has earned their live account?

4) It actually takes a higher degree of self-control to consistently demo trade. You can reset a demo account and that is the real failing of traders using them.

5) There is nothing wrong with demo trading - otherwise it would not be used in the professional world.

I've edited your post with numbers corresponding to my answers for ease of reading for others.

1) Where I come from a professional is called a professional because they are just that. Someone is not called a professional just because they get paid to do it and you are using the term loosely which is disrespectful of those that are professionals.
Example: An amateur (see its even in the title) actor gets a paid job as an extra or even a one line pop up scene - that does not entitle them to put on their CV professional, and then there's the argument of how long that title stands for. If that's the case then I am a professional school boy, paper boy and kitchen porter.

2) I will not comment on a generalisation of people here as that would be presumptuous of me to do so. It's also inappropriate for you to state this as not all traders on here are 'more like interns'.

3) I cannot compare as I simply do not know the answer to this. However, I would never dare compare myself in anyway to that of a professional trader. As is stands I am a retail trader and for the benefits of HMRC (Tax revenue in UK), I am just a gambler. But again, this does not stop me from hanging around professional traders (for which I will be doing shortly and am due out to the clubs till the early morning - it's just gone 6pm here). Its good to note though, as much as I do not compare myself against the professionals, I do actually earn more than some of them. This still does not entitle me to the title professional. Although I do kick some f**king good trades.

4) You cannot 'reset' a real account - you have to put in more hard earned cash and by doing so, changes and hardens the person each time they do this. They will concentrate more, or in some cases not. I know of so many people trying for years and still burning money or 'making' (term used lightly like a gambler 'makes' money from the 1 time spin on a Friday night) insignificant money. You succeed or you go home. This ain't brain surgery.

5) See my other posts relating to this.

Lee

 

[Penny Picks]

Demos and learning to trade.

There are a lot of good answers here on why/why not use a DEMO" account to learn trading. Some bad reasons are:

• No live data
• EOD (end of day) data only
• Bad fills

The list could be almost never ending

However, what didn't seem to be covered is the many things a price chart can reveal to capture a good trade.

A NOOB may not have super large pile of cash to make a "good" trade or get into what will more than likely a bad trade.

Chart patterns IMOP are essential to trading; I'm a 'Tech Trader'
Here are a few profitable patterns

1. Triangles
2. Flags & Pennants
3. Top and Bottom patterns

You can find samples here:
https://www.investopedia.com/university/technical/techanalysis8.asp

My favorite is called a 1-2-3 Top / Bottom price pattern. This on, and all the others for that matter, must have at least 3 verifying indicators.

Attached is a Bottom 1-2-3 pattern.

This kind of stuff takes a good charting system to learn how to recognize the patterns and how to trade them.

Note: The 123 is usually followed by a 'FLAG' that can give an indication just how far the price may rise or fall

Is it a perfect way to trade? Not really; just another way to trade.

 

[shadyee]

There are a lot of good answers here on why/why not use a DEMO" account to learn trading. Some bad reasons are:

• No live data
• EOD (end of day) data only
• Bad fills

The list could be almost never ending

However, what didn't seem to be covered is the many things a price chart can reveal to capture a good trade.

A NOOB may not have super large pile of cash to make a "good" trade or get into what will more than likely a bad trade.

Chart patterns IMOP are essential to trading; I'm a 'Tech Trader'
Here are a few profitable patterns

1. Triangles
2. Flags & Pennants
3. Top and Bottom patterns

You can find samples here:
https://www.investopedia.com/university/technical/techanalysis8.asp

My favorite is called a 1-2-3 Top / Bottom price pattern. This on, and all the others for that matter, must have at least 3 verifying indicators.

Attached is a Bottom 1-2-3 pattern.

This kind of stuff takes a good charting system to learn how to recognize the patterns and how to trade them.

Note: The 123 is usually followed by a 'FLAG' that can give an indication just how far the price may rise or fall

Is it a perfect way to trade? Not really; just another way to trade.

Honestly, we cannot 100% compare or match demo with real trade. But this is not the idea, what demo does is give you a fore glimpse of what you should be expecting in the market.
We cannot deny the help that can give, nothing would be strange, just few if there are any.

 

[sminicooper]

To demo or not – it’s an interesting question. I think there’s a parallel here between what is done in the trading world and the aviation world. In professional flying (the amateurs don’t usually have the resources or finance) the simulator is used to rehearse and learn everyday procedures and emergencies etc before the crew is let loose on the real thing in the real environment. From what I've read in foregoing posts isn’t that what professional traders do also? It’s certainly been a good idea in the aviation environment and on occasion has flagged up procedural shortcomings in connection with accidents (black swans?) and has given crews the confidence to deal with situations that might otherwise have got completely out of hand. Think about it as a passenger – would you want your captain’s first experience of engine failure on takeoff to be for real or would you be more reassured if he had successfully practised the procedure many times in the simulator? So why would you risk your hard earned cash for real in trading just because you know the theory, correct procedures and what you ought to do?

Of course, just as in trading the simulator is not a substitute for the real thing – you can crash it and fly beyond its limits and you won’t die but that doesn’t mean to say it’s not a useful tool. And, when the pressure is on it can be pretty damn realistic – even from the psychological point of view when you know, at the back of your mind, that you’re not in the real thing and you can't die! There are good parallels here with your demo account – which can also of course be reset after you have crashed and burned.

So I believe that demo trading has its place. It’s not a substitute for real trading but IMHO it’s a very worthwhile step towards becoming a competent and successful trader – I can only speak for myself as amateur/retail but it’s been pretty useful to me. It may sound daft but losses and mistakes on a demo account are very realistic to me because that’s the way I play it psychologically, and I try to do everything as I would for real – and that has certainly helped me to overcome some psychological hangups. I don’t know whether professional trading organisations let new traders loose on real money before putting them through a simulator – but no decent airline would let you anywhere near an aircraft until they see you perform satisfactorily in the simulator.

I would agree with those that say using real money in a real account will teach you the real thing; but shouldn't that come later on in your trading career when you have at least got the basics sorted out i.e. you (think) you know what you're doing, you've practised it and at least have some semblance of an edge. The live account is there to find out if you were right!

 

[Lee Shepherd]

Both sminicooper and Penny Picks have brought up some valid points and on the surface seems great......but:

@ Penny Picks

Many new wannabe traders will grab hold of patterns, as you've mentioned, triangles and 1,2,3 patterns etc. If I may give others advice that are reading (as I assume you already know this). 'They' do not work. It's you that make them work. Now this is obvious to the likes of you and me as we understand that it is us that makes the trade work or not, however, new comers think or believe or are simply on the understanding that they can see a pattern, trade it and make money. Like seeing money on the ground in the leaves, once seen, you simply bend down and pick up all that cash. But that ain't the truth.

@ sminicooper

Once again I cannot compare what amateur/trainee pilots do against traders as I do not know of any pilots, professionals or otherwise. But, your analogy seems sound and makes sense. As I cannot compare, I cannot come back with anything related to this. But I can go back to my original statement and following posts as to why not demo trade.

I would only ask the question of this:
Once a pilot turns professional, do they then still use demo/sim? I would imagine the answer to be yes and in which case would refute my opening post. I know that fire arm police, army, SAS etc regularly have training (demo scenarios). The only thing I have to go on here is this:
I am currently surrounded by professional traders, all make money but some a lot more than others. Some use their own cash, others are institutional. It's pertinent to note that none of them are on demo or using a sim, nor are any 'trying out different methods, algos or strats'. In fact the only reason someone goes back to demo is because they f**ked up and run out of cash or f**ked up someone else's portfolio and got sent home forever. If you follow your/the plan, you are always in control of the outcome, therefore the markets can never f**k you up. Everything else from there on in is a bonus.

SO...... I still stick by my original opening post. Get off the demo and see how one fares against themselves and the market. Test yourself with your hard earned cash. Its not a plane, you will not crash and burn, its not the army either so you won't get shot or die, its simply seeing how you react to losing as well as winning. You'll be surprised on how you react.


All the best for today.

Lee

 

[wallstreetking]

I would disagree if you are trading a system that you haven't backtested. Trading live would be considered as foolish gambling.
If you have backtested the strategy for atleast 3 years and it shows a positive expectancy in the medium to long term then by all means start trading with a live account.

 

[Trader333]

Please keep any differing views and language civil.

 

[Penny Picks]

Both sminicooper and Penny Picks have brought up some valid points and on the surface seems great......but:

@ Penny Picks

Many new wannabe traders will grab hold of patterns, as you've mentioned, triangles and 1,2,3 patterns etc. If I may give others advice that are reading (as I assume you already know this). 'They' do not work. It's you that make them work. Now this is obvious to the likes of you and me as we understand that it is us that makes the trade work or not, however, new comers think or believe or are simply on the understanding that they can see a pattern, trade it and make money. Like seeing money on the ground in the leaves, once seen, you simply bend down and pick up all that cash. But that ain't the truth.

Lee

Price patterns do work. That is if there are at least 3 indicators to qualify the price patterns. ie: 3 of the most common

1. RSI
2. Stochastics
3. MACD

Divergence is a must do for the indicators to show you may have hit a winner
These work exceptionally well with the 123 pattern.
I also use the ADX +- DI indicators and the Adroon.

A 'Bull or Bear' flag usually follows a 123 pattern and is a big help in indicating where prices may go to after a break-out.

 

[brewski1984]

Price patterns do work. That is if there are at least 3 indicators to qualify the price patterns. ie: 3 of the most common

1. RSI
2. Stochastics
3. MACD

Divergence is a must do for the indicators to show you may have hit a winner
These work exceptionally well with the 123 pattern.
I also use the ADX +- DI indicators and the Adroon.

A 'Bull or Bear' flag usually follows a 123 pattern and is a big help in indicating where prices may go to after a break-out.

My bucket shop gives me all the indicators I could ever need and more. They spend millions on the latest technology to make sure that I have access to all the best technical analysis available, not only on my computer but also my phone so that I can sit in the pub trading. They offer me courses on how these indicators work and how the best way to utilise these are.

You do have to ask yourself why the hell would they do that if I could throw up a simple MACD and RSI and then start taking money out of their pockets?

 

[Lee Shepherd]

I would disagree if you are trading a system that you haven't backtested. Trading live would be considered as foolish gambling.
If you have backtested the strategy for atleast 3 years and it shows a positive expectancy in the medium to long term then by all means start trading with a live account.

Morning wallstreetking,

Back testing over 3 years is simply too long. Markets and behaviour change over this period of time and is akin to getting in to a trend at the end before the bend. Hence why so many still lose money and on a regular basis. Also, the major problem with backtesting is that curve fitting is always prevalent.

Still, it's not about the system, algo, method or whatever. It's also not about MACD's or RSI's etc. It's about the player. Let me explain for those that do not know how simple trading really is:

Once you have created a system that consistently loses money, do the opposite (ie, short when it says long and long when it says short), and you will make money...... guaranteed. Why? Because if you find a system, robot or whatever someone wants to call it that loses money, by doing the opposite, you will make money and win instead of losing. Ok, so that's really obvious yes, so why do most actually pay no attention to this simple rule, or worse still, argue against it? Therefore making money in the markets is really that simple. But....... why does it not work or more to the point why does the 'trader' not make it work......well...... you'd have to ask them that, and they will only know from what their book and diary say's, that's if they bother to keep strict management of time and emotions.

PS: Apologies for my rant last night. I was p1ssed and pumped when I read the post and my mouth got ahead of my brain. Still, I stand by the original rant. Sometimes an F bomb (or several) can get the message across better than a long drawn out explanation. I hope you didn't take offence as none was intended.
PPS: I act the same face to face as I do on line, I'm no internet warrior. Peace and love.

Have a good day trading.

Lee

 

[skyknight]

Thank you for your sharing! I got a lot out of it!

 

[new_trader]

Everything is supply & demand

Morning wallstreetking,

Back testing over 3 years is simply too long. Markets and behaviour change over this period of time and is akin to getting in to a trend at the end before the bend. Hence why so many still lose money and on a regular basis. Also, the major problem with backtesting is that curve fitting is always prevalent.

The law of supply and demand never changes and its effect on a market can (and should!) be studied and observed as far back as there is available data for your chosen instrument. Markets go through phases, but the fundamental principle of supply and demand never changes. Once you understand how the law of supply and demand operates in your chosen instrument, you can apply the principle to any instrument your heart desires.

 

[Lee Shepherd]

The law of supply and demand never changes and its effect on a market can (and should!) be studied and observed as far back as there is available data for your chosen instrument. Markets go through phases, but the fundamental principle of supply and demand never changes. Once you understand how the law of supply and demand operates in your chosen instrument, you can apply the principle to any instrument your heart desires.

Hey new_trader,

As a long standing member (since you joined in 2006), I will not argue with your methodology or point of view. I refuse to go head to head with someone who is a full time successful and profitable trader. I'm here to help the new ones look to succeed only - whichever path they choose or who they listen to.

My only advice to new comers is to listen to those with proven track records. The rest can be dismissed.

Lee

 

[DionysusToast]

I've edited your post with numbers corresponding to my answers for ease of reading for others.

1) Where I come from a professional is called a professional because they are just that. Someone is not called a professional just because they get paid to do it and you are using the term loosely which is disrespectful of those that are professionals.
Example: An amateur (see its even in the title) actor gets a paid job as an extra or even a one line pop up scene - that does not entitle them to put on their CV professional, and then there's the argument of how long that title stands for. If that's the case then I am a professional school boy, paper boy and kitchen porter.

2) I will not comment on a generalisation of people here as that would be presumptuous of me to do so. It's also inappropriate for you to state this as not all traders on here are 'more like interns'.

3) I cannot compare as I simply do not know the answer to this. However, I would never dare compare myself in anyway to that of a professional trader. As is stands I am a retail trader and for the benefits of HMRC (Tax revenue in UK), I am just a gambler. But again, this does not stop me from hanging around professional traders (for which I will be doing shortly and am due out to the clubs till the early morning - it's just gone 6pm here). Its good to note though, as much as I do not compare myself against the professionals, I do actually earn more than some of them. This still does not entitle me to the title professional. Although I do kick some f**king good trades.

4) You cannot 'reset' a real account - you have to put in more hard earned cash and by doing so, changes and hardens the person each time they do this. They will concentrate more, or in some cases not. I know of so many people trying for years and still burning money or 'making' (term used lightly like a gambler 'makes' money from the 1 time spin on a Friday night) insignificant money. You succeed or you go home. This ain't brain surgery.

5) See my other posts relating to this.

Lee

Some very convoluted responses.

The bottom line is pretty simple. Prop firms want interns to make money on demo first.

Then they put traders on live accounts if they do ok on demo.

Then they put traders back to demo if they slip up live.

Telling people to "just trade with real money" when they aren't ready is irresponsible.

OF COURSE trading live money is different... But intern doctors practice in SIM too - with a more experienced doctor looking over their shoulder having a say in when they are ready when to go it alone.

Demo. When ready, go live. If that goes badly, go back to demo.

Going from demo to live and back makes a lot more sense than your "never demo" mantra - which basically comes from your personal theory, not from any firm on planet earth.

 

[Penny Picks]

The law of supply and demand never changes and its effect on a market can (and should!) be studied and observed as far back as there is available data for your chosen instrument. Markets go through phases, but the fundamental principle of supply and demand never changes. Once you understand how the law of supply and demand operates in your chosen instrument, you can apply the principle to any instrument your heart desires.

It's a very good principal if you are a long term trader or a fund manager, in theory. However, the average trader doesn't have deep pockets or thinks long term.

There are "Thousands", if not more, stocks to trade. Most traders view trading as a psychological game; I think this market is going up. Never mind that the market is in the ""BEAR" mode. The trader believes the "BULLS" are going to take over the market; that's "psychology" in play.

Me? I'm in it for the short haul. Get the most money possible in the shortest time. What the world is doing that effects the markets doesn't get that much attention from me. My indicators give me the "Short Hand" version of what is going on in the markets.

IE: At the end of a down trend the Bears try to keep control, or the Bulls try to take control. That's a 123 up pattern in play. That's when I get in the game.

 

[DionysusToast]

The law of supply and demand never changes and its effect on a market can (and should!) be studied and observed as far back as there is available data for your chosen instrument. Markets go through phases, but the fundamental principle of supply and demand never changes. Once you understand how the law of supply and demand operates in your chosen instrument, you can apply the principle to any instrument your heart desires.

Stocks have finite supply (the float). Even so - that rarely impacts price. There's always stocks that have a supply problem at any specific point in time but supply never impacts all stocks.

So yes, some stocks have supply issues. Not all.

Futures have infinite supply. How can understanding supply and demand in a stock (finite supply), help you with supply and demand in a futures market(infinite supply)?

Wide sweeping statements like yours should be explained, lest they be passed off as some twot trying to sound clever like... :cheesy: