how different is the real world trading from a trading on a simulator?

A

Andrico

Good day traders,

I am a newbie in training. I was wondering if you can shed some light on the following question:

What is the fundamental difference between trading in a virtual account and the real world trading?

I was trading with a vaying success on a simulator and planning to finally step into the real world in a couple of months. Is this a huge difference? There must be some, because some results I've seen on the simulator are so strange. For instance, at Investopedia website there are couple of guys who consistenly (at least since the beginning of 2008) earn 300-500% per quarter. There is one, who started this May and turned 100K$ (of virtual money) into 72 million just buying index funds options !!! And he wasn't just lucky, you can see the history of his trades from the start. It's quite consistent. And this is especially strage given the fact that at that website you can't even write options, only buy them.

Thanks in advance,
Andriy
 
Quote from Andrico:

What is the fundamental difference between trading in a virtual account and the real world trading?

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1) Psychological factors and execution factors.
2) "Real" money is different than simulated money.
3) The "real" market will behave differently than the simulated market.
4) A simulator is good for practice but don't fall into the trap of spending too much time on it because it's not a complete & proper representation of what you will encounter with a funded account.
 
Quote from MTE:

Psychologically, it's day and night.
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I find sim trading worse than useless most times. It will fool you into thinking you are good and then you try with real $$ and it's a diff story.
 
Quote from Andrico:

There is one, who started this May and turned 100K$ (of virtual money) into 72 million just buying index funds options !!!
Andriy
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Yes, he was lucky.

1) He bought options before the implied volatilities exploded.

2)He bought options before the market exploded with volatility.

If you believe you can do anything similar you are in fantasyland.

If you want to trade options, try to UNDERSTAND how options work. If you believe they are mini-lottery tickets, you are in big trouble before you get started.

Simulated trading is fine for practice. You can see how options move when the stock moves. You can learn the effect of time decay. but unless you can trade real money without any emotions, simulated trading won't help you.

Start with the basics. If you begin by gambling (buying options in this environment is gambling), you will either go broke or make a bunch. there's no in-between right now.

Mark
http://blog.mdwoptions.com/options_for_rookies/
 
Psychological, mainly.

Paper-trading I would run 8 ES futures contracts w/o blinking an eye.

Even though I'm well-capitalized, I started slowly in the real market, and good thing --- when I went "live" having only 2 contracts in the market terrified me with ice in my veins until I closed the position for either profit or loss. I traded them for a while, got used to things, trained myself to relax and trade my plan.....and then went to 4, and so forth.

And if I ever start feeling 'scared' there's nothing wrong with going from 10 or 8 down to 6 or 4 or 2 until your confidence returns or psyche improves.
 
I guess the most direct analogy would be something like driving a car in a computer game vs. real life driving.

In a computer game the next time you come into a corner too fast the most that is at stake is that you lose a game. So what, big deal...Press the "restart" button and you are set for another race.

The next time you come into a corner too fast in a real car your life is at stake...

Just because someone is a F1 world champion in a computer game doesn't mean he/she will be a good F1 driver in the real world.

It's the same with trading. The next time you wipe out in a virtual account you press "restart" and you're all set for another round of astronomical returns.
 
It is the same as the combat between soldiers in real life and in video game, while in video game you have a RESET button when game over, unfortunately not in real life. :D
 
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