Is a demo account waste of time?

There is no difference between a demo and a live account. The difference is in the "mind" of the trader that discriminates.....(biased due to a rush to make money / influenced by reading/others.....impatient and greedy)

Live trading is a trap where the trader is being tested on his/her emotions, in fact, this does more damage that one realise as it builds mental barriers which make it even harder to overcome due to losses. (This is where the trader is being controlled by the markets)

One should practice on a demo account until one "knows" how to make money. (This is where the trader is in control rather than being controlled) Only then you may trade a live account and not any moments before.

So a demo account isn't a waste of time.
 
I'll add, longer term swing trading demo is going to work better for, day trading and approaching scalping it's going to be less effective.

Same as back testing, not enough info on a M1 chart to back test entries, you need tick data being replayed, if your a H4 trader and don't need exact entries and 5pip SL's then fair enough.
 
Blueline said:
There is no difference between a demo and a live account. The difference is in the "mind" of the trader that discriminates.....(biased due to a rush to make money / influenced by reading/others.....impatient and greedy)

Live trading is a trap where the trader is being tested on his/her emotions, in fact, this does more damage that one realise as it builds mental barriers which make it even harder to overcome due to losses. (This is where the trader is being controlled by the markets)

One should practice on a demo account until one "knows" how to make money. (This is where the trader is in control rather than being controlled) Only then you may trade a live account and not any moments before.

So a demo account isn't a waste of time.
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Could not say it better!
 
d08 said:
If he would put that size up all at once, what do you think would happen?
Even smaller size moves markets, it's a basic supply and demand principle as it's a marketplace not unlike a physical one.
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What do big funds do? Buy 50 shares a day, because they will influence the market, till they have the amount of shares they want?
Bill Gates is selling at this moment 1 MILLION shares of microsoft A DAY without really influencing the market. Some days the stock goes even higher although Gates is dumping.
Go to yahoo finance and check insider transactions on various stocks. You will find a lot of stocks with buy or sell transactions in the size of over 100.000 shares a day.
Coca Cola bought some time ago over 6.000.000 shares Keurig Green Mountain, Inc. in 1 day!

http://openinsider.com/
 
Those funds all use algo execution systems, relying on some very complicated math to figure out the best way to acquire and release positions.

Regarding the the purchasing of 6m shares (or some other high amount) in a single day, it's not like there's some guy with a mouse and keyboard deciding when do buy that. Just doing some quick math, if there are 450 minutes in a trading day, that's ~13,000 shares that would need to be moved every minute (on average).

And you can't determine what market impact truly is, because you can't know what the market would have done without your involvement. There are theoretical models like Kyle's Lambda, but up there with the Heisenberg's uncertainty principle you can't make the observation without affecting the outcome.

Honestly I think that's one of the hardest things I've encountered in quant trading. A lot of people get caught up in buy/sell signals, but trx costs (market impact being a component) can easily crush an otherwise successful system.
 
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Risk619 said:
Regarding the the purchasing of 6m shares (or some other high amount) in a single day, it's not like there's some guy with a mouse and keyboard deciding when do buy that. Just doing some quick math, if there are 450 minutes in a trading day, that's ~13,000 shares that would need to be moved every minute (on average).
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Algo or not if 6 mio shares were bought that day, no algo can deceive the market and tell them these shares were not bought and the price should stay low. Normally the price should have gone up strongly. But price did not do that.

Gates sold for several days in a row 1 million shares a day. That should have impact on the market too. But the stock went higher, which is not logical if an insider dumps stocks massively. Price should have gone lower. Or do I miss something?
 
i am nobody said:
Algo or not if 6 mio shares were bought that day, no algo can deceive the market and tell them these shares were not bought and the price should stay low. Normally the price should have gone up strongly. But price did not do that.

Gates sold for several days in a row 1 million shares a day. That should have impact on the market too. But the stock went higher, which is not logical if an insider dumps stocks massively. Price should have gone lower. Or do I miss something?
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I don't think anyone is going to say "Yes Mr. Gates, we'll sell those 1m shares a day and there will be no impact."

I think the conversation probably went "Mr. Gates, the best thing to do would be for us to unwind those positions over a longer course of time. If you really want them gone in a week, we can do that, and we will use our highly sophisticated order algo to minimize the market impact as best we can, especially since you probably arranged the commission structure so that we benefit by selling at higher prices."

Just putting some context around it, if someone is long 10K shares of XYZ and they bought at 91.01, and they're going to get out at 91.05, then market impact is a huge deal because it directly affects the profitability of the strategy. That's the extreme case of volume scalpers, but they're out there, and trx costs are their number one enemy.

If Gates picked up those shares at deep discounted option pricing, or they were his original shares from back in the day, I'm not sure what the valuation is but for the hell of it let's say $1/share, and now it's 43.87. So even if he sees sell prices in the 42.75 - 43.87 range, it's a concern but in the grand scheme of things he's the one who needs to determine how much of a thing it is for him (ie: is making 43x profit okay and 42x unacceptable? Maybe it is, his call, but I suspect he trusts whatever broker he's using, I know he's close with Buffet so I imagine he's got guys on speed dial that I've only seen on TV).
 
Risk619 said:
I don't think anyone is going to say "Yes Mr. Gates, we'll sell those 1m shares a day and there will be no impact."

I think the conversation probably went "Mr. Gates, the best thing to do would be for us to unwind those positions over a longer course of time. If you really want them gone in a week, we can do that, and we will use our highly sophisticated order algo to minimize the market impact as best we can, especially since you probably arranged the commission structure so that we benefit by selling at higher prices."

Just putting some context around it, if someone is long 10K shares of XYZ and they bought at 91.01, and they're going to get out at 91.05, then market impact is a huge deal because it directly affects the profitability of the strategy. That's the extreme case of volume scalpers, but they're out there, and trx costs are their number one enemy.

If Gates picked up those shares at deep discounted option pricing, or they were his original shares from back in the day, I'm not sure what the valuation is but for the hell of it let's say $1/share, and now it's 43.87. So even if he sees sell prices in the 42.75 - 43.87 range, it's a concern but in the grand scheme of things he's the one who needs to determine how much of a thing it is for him (ie: is making 43x profit okay and 42x unacceptable? Maybe it is, his call, but I suspect he trusts whatever broker he's using, I know he's close with Buffet so I imagine he's got guys on speed dial that I've only seen on TV).
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I would like to know how he did it, maybe I need it later too. But I still have time. It is not urgent. :D
 
Demo account is to be avoided once one learns the order and the logistics. You will never learn how to trade successfully until real money is put into the real market and real losses have been incurred. Those who spend a lot of time in a demo account will also be the ones who will commiserate over each trade and want to be right every time---instead of entering trades with small stops and letting winners run. Get Right.
 
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