Is there really a difference between live and SIM?

H

halfwaythere

In the infamous thread "Trading with stop losses in a futures market is for losers" a couple of things were brought up that I thought were interesting.


So you all say MM or whomever hunt down your stop losses. This would indicate that SIM is significantly different than trading live. Correct?
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Quote from fullautotrading:

Yep, the microstructure would be different, as it is evident anytime you place an order (especially if large).

However, for most "meaningful" strategies, which take their due time to work and allow for other participant's action to take effect, and have smarter hedging schemes, SIM would still be ok.

(Clearly, if you are attempting to go after a few ticks, which is nonsense anyway, of course the SIM would be totally misleading, as it would give a "neutral" environment, while the "real" one is not. But for "larger" strategies it's ok)
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Now lets take the example of the average Joe with a 10k account trading 1 contract on the ES. He uses an ATM strategy of a 1 point loss.

Correct me if I'm wrong, but how could SIM be different than LIVE if the broker can't even see your stop loss?

I've seen price movements where it seems like MM were SL hunting, so I'm a bit skeptic of the subject. But I can see the position from both sides and juts trying to settle it once and for all.
Thoughts?
 
I haven't used many sims, but it's my understanding some sims are more realistic with fills than others. Also there is little emotion involved when trading sim bucks.
There will be emotion involved when you start a real money account. Something a sim cannot prepare you for.

In some cases sims probably can be useful, up to a point. But just because you're "successful" with a sim doesn't necessarily mean you will be with legal tender on the line.
 
Quote from halfwaythere:...Correct me if I'm wrong, but how could SIM be different than LIVE if the broker can't even see your stop loss?...[/B]
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Broker Platform: Most simulators are not realistic in comparison to real trading (e.g. margin requirements, spreads, fills)

Psychological: Most traders (discretionary traders) do not trade the same when traversing from simulator to live (real money) trading. Its easier to understand for you to just put on a 1 contract trade on simulator and then compare your emotions, heart rate, stress, anxieties when you do a 1 contract trade with your real money.

There's a lot more to profitable trading than just trade signals.

In contrast, if you're using an automated trading system...there should be no difference when traversing from simulator to real money trading.

P.S. Many journals here at ET by traders on simulator with a so called edge and then they couldn't understand their losses when they went to real money trading.
 
Quote from wrbtrader:

In contrast, if you're using an automated trading system...there should be no difference when traversing from simulator to real money trading.
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It has taken me over a year of live automated trading before the emotional side of being in an (automated) trade vanished ... the corollary of this emotional side being taking over control of random trades (usually to bail out).

I added a column ("cost of discipline error") to my trade-log spreadsheet to track the cost of these discipline errors. It helped me realize how much I was hurting my system's performance.

My next step was to walk away from my trading desk when a trade was on and I didn't feel comfortable with it.

But in the end, it takes an immense amount of confidence to watch those automated trades without emotion, regardless of the outcome. For me, that confidence can only come from trading systems with thousands of trades in backtest, and knowing in advance the average level of drawdown I should expect from a system when traded for 1 year & 5 years.

Ironically, my new system (CL always-in) just made its worst drawdown in over 3 years right after I started trading it live (that account went -20% in 5 weeks). I kept trading it faithfully, and it recovered and has now made a new P&L peak (account +17% 4 weeks later). But I suspect many people would have stopped trading it right around the time of the max drawdown, purely for psychological reasons.
 
So the biggest difference is psychological, that I understand. So would the mindset "trade like this is sim" be wise? I could see that leading to blowing out your account.

I take it no one here buys into the SL hunting by MMs?
 
If you're trading 1 contract it's probably not going to make much of a difference if you trade SIM vs. live.

If stops are hunted, your 1 contract isn't going to make a difference.

If you're trading large size for your specific contract, then it might be a bit different.

Sim accounts are also good for familiarizing yourself with the software. When something happens and you need to adjust a stop or close out your position or something, do you know exactly how to do that?

I've heard that stops get hunted. It makes sense on a theoretical level that the majority would be wrong, and a small minority make most of the money. I haven't seen any evidence to confirm or deny that, however.

It's interesting to think about trading in that manner, though. If what you're about to do is probably wrong, what should you do instead?
 
Quote from 1a2b3cppp:

It's interesting to think about trading in that manner, though. If what you're about to do is probably wrong, what should you do instead? [/B]
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Bingo.

Which is where I am at. I swear it's not paranoia. The market hunts my stops and I progressively move my stops and the price follows like it sees what I am doing (not ALL the time, but usually when there is LOW volume).

Then - I surrender and just say OK, this trade isn't going in my favor time to bite the bullet. Once it hits my SL to the TICK - BAM reversal in my direction. Not placed at any specific or important levels either. Just random.

Trading 5 contracts ES. This does not happen on SIM. But each moment in the market is unique, so it's hard to compare them.
 
Each time you get stopped then the market makes the move you where expecting, you have either an entry-level issue, or an entry-timing-issue, or both, in addition to having a stop-placement issue.

If you have a verified edge (through backtesting thousands of trades), then those situations have to effect your results less than your winning trades, and you shouldn't be bothered by that, it's just part of trading.

If you do not have a verified edge (through backtesting thousands of trades), then don't look any further, this is your issue in the first place, and time to work on it.
 
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