Is a demo account waste of time?

[dbphoenix]

You never have fear of losing money? Then you would be the exception. When a trader trades for his living, has a family and expenses, the fear is real. A bad day, month or year can lead to problems. I've encountered it myself and have watched it MANY times in others.

Over the past twenty years, I've observed it many times in others as well, always because one is afraid of being wrong and losing money. This virtually guarantees that the beginner will be wrong and will lose money. Few beginners even have thoroughly-tested trading plans.

If one is afraid of being wrong and of losing money, he ought to find some other way to spend his time.

 

[cornix]

Not more than training of whatever other skill is a waste of time.

 

[rmorse]

I'm referring to trading as a business. Even someone that opens a restaurant can have fear of not making money and paying bills. I'm not referring to losing money on a trade. That is part of the business of trading. I traded for 25 years. Never knew what I would make the next month or year. The fear was healthy.Keeps risk inline and profits steady. Keeps you on your toes.It worked well for me. I watched others that traded for big firms and had salaries out of college, not care at all. Sometimes that was reflected in their losses.

 

[dbphoenix]

I'm referring to trading as a business. Even someone that opens a restaurant can have fear of not making money and paying bills. I'm not referring to losing money on a trade. That is part of the business of trading. I traded for 25 years. Never knew what I would make the next month or year. The fear was healthy.Keeps risk inline and profits steady. Keeps you on your toes.It worked well for me. I watched others that traded for big firms and had salaries out of college, not care at all. Sometimes that was reflected in their losses.

The adrenaline rush that one feels when he begins his session should not be confused with fear. If one is afraid of what he faces, then he has no thoroughly-tested and consistently-profitable trading plan. Not knowing the outcome of any particular trade or the future in general is the nature of trading, and of life. But if one knows that the probability of profit is of a sufficient level over a series of trades, there is, again, nothing to be afraid of. I've been in the market since 1977, but that in itself doesn't mean much. Children can trade without fear. And do. Trading without fear does not mean not caring; it means knowing what one is doing.

And I owned a restaurant. It is nothing like trading.

 

[i am nobody]

To understand fear for trading you should experience it yourself. From what I read you never had this problem. Something you don't know you cannot understand; although you might think you understand it.
I had no fear when I started trading. One day I wiped out my account completely and became apparently afraid to trade. I knew it had nothing to do with my system, just did not respect my stop and caught the mother of all losses.
By broker called me several times a day and asked me each time what I was supposed to do according to my system. I told him each time what the system told. After the closing of the markets he called me again and said to me:

• I called you at .... You told me you should go short, you did not go short and missed XXXX $. Why did you not take that trade?
• I called you at .... You told me you should go long, you did not go short and missed XXXX $. Why did you not take that trade?
• I called you at .... You told me you should go short, you did not go short and missed XXXX $. Why did you not take that trade?

This went on for many months. Sometimes my broker did trades that I was afraid to take and he took the money. I was busy every day to reanalyze charts from the past and tried to convince myself with the results to start trading again and to be confident. Mathematically I could not lose money in the long run. But it was indescribable how hard it was for me to push the button again to make a trade. I never used drugs,but I think you can compare the grade of difficulty with kicking off from drugs. I was lucky because my winning trades ratio was extremely high, so easier to overcome the emotional problems. I think if my winning rate would have been below 75% I would never have been able to start trading again.

 

[i am nobody]

Not more than training of whatever other skill is a waste of time.

Sometimes people ask me: I have a very good system, should I first trade simulation or go immediately real?

I always answer them: First go demo. If you really have a good system you will be rich with a few months delay. If your system appears to be poor at least you will not be broke.

 

[dbphoenix]

To understand fear for trading you should experience it yourself. From what I read you never had this problem. Something you don't know you cannot understand; although you might think you understand it.
I had no fear when I started trading. One day I wiped out my account completely and became apparently afraid to trade. I knew it had nothing to do with my system, just did not respect my stop and caught the mother of all losses.

So your fear was generated by your inability to follow your system. That is a personal problem. It is not an inherent feature of trading.

There is nothing to be afraid of in the market. But there may be a great deal to fear of oneself.

 

[TooOldForThis]

Paper trading has no fear or creed. Without those emotions, you'll never know if you would make the same decisions.

I agree that this can be a problem. The solution is to paper trade like your life depended on it. And when you trade real money, try to not be so worried about it. The objective is to get yourself to be equally emotionally involved whether its practice or the real thing.

The best coaches do the same thing. Apply a lot of stress to the players in practice and go easy on them during the real game. Again the objective is to get the players to practice under real world conditions. It's not easy, but practice is very useful if done right.

 

[moonmist]

I agree that this can be a problem. The solution is to paper trade like your life depended on it. And when you trade real money, try to not be so worried about it. The objective is to get yourself to be equally emotionally involved whether its practice or the real thing.

The best coaches do the same thing. Apply a lot of stress to the players in practice and go easy on them during the real game. Again the objective is to get the players to practice under real world conditions. It's not easy, but practice is very useful if done right.

Hi,

I agree that paper trading is useful. Similarly, flight simulation is used extensively in the aviation industry to train pilots and other flight crew for both civil and military aircraft.

Besides fear, greed and other emotional issues, some problems only reveal themselves during LIVE trading. For example,

a) Most simulators allow traders to submit a limit BUY order with the triggering price above the limit price. All the brokers I have traded with will reject this type of order during LIVE trading.

b) Many years ago, I longed one contract of crude oil futures via thinkDesktop. When I tried to lock in some profit, I accidentally raised the stop loss order above the ask price. ThinkDesktop cancelled my stop loss order, and crashed immediately. I have done similar things in their paper trading account. No problem at all.

c) The following problem with Interactive Brokers/Sierra Chart only occurred during LIVE trading.

https://www.sierrachart.com/SupportBoard.php?ThreadID=2359

In my experience, no simulator is perfect. Just my two cents.

 

[i am nobody]

In my experience, no simulator is perfect. Just my two cents.

That's why it is called simulation.

About prices in simulation: I always took market price and a slippage on that price to be sure not to get a too optimistic price.
Be very careful too with backtesting. I know somebody who did a backtest in TS 9.0 and all his trades went from start in profit, it was really hallucinatory. In real trading he went negative from start. It was very complex programming, so something went wrong there. It was kind of HFT, so probably his simulation prices did not correspond with market prices in real trading. So he had to postpone quiting his job and becoming a fulltime trader. One and a half year later now and he is still struggling to make profits. Account is -50%.