Sim VS. Real Money trading
- Thread starter Jdesey
- Start date
When scaled to real money without consideration will cause you to jump off the roof on a bad day. Not lol ...
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Rich ''turtle'' Dennis used computerized systems, with discretion. But later he warned + its a matter of public record ''it's the job of the market to wreck computer stems '' LOL So even if someone uses a fully auto system, its requires discretion /discretion as to which market to trade/ invest.........................................................................................
NinjaTrader_Ray
ET Sponsor
NinjaTrader has a "Shadow Trade" feature that allows you to run a different exit strategy in simulation in parallel to a live trade. The purpose is to compare the difference between two different exit strategies on the exact same trade entry.
Specific information on how this works is located here - http://ninjatrader.com/support/helpGuides/nt8/en-us/shadow_strategy.htm
Ultimately you need mileage on a real cash account. I would stay clear of CFD's and spreadbetting as the stops are just too big.
Saying this, CFDs are a good way to learn and if you can trade them on pro realtime charts software I would do that for small money. Scale it from there.
Alternately, you could fund a margin account, however you would need 20k+. However if you do this, you could trade mini lots on dow, sp500 or on gold and oil.
However they will still be medium to large sized amounts per contract. Micro gold is pretty cheap. About 50 cent a tick.
This is the type of contract you want to trade to get mileage. The point is that it IS real money but just small amounts.
Please dont spreadbet where the stops are just too big as a mandatory as this forces you risk to be too big. Also you are trading an amount per trade as opposed a set contract and contract price. It doesnt teach you to trade better.
I think only seasoned traders should do spreadbetting.
I hope this helps. I have seen so many guys I trained with and others do great on sim, but bottle it when going live.
It forces you to think completely differently. Do not underestimate this AT ALL.
There are at least a couple of reasons.
1) on most sims i have played around with they are unrealistic in the sense that a trade will execute if price reaches an order you placed i.e. if the price in the market is touched. In real trading usually price is going to have to trade "thru" your order price by at least a tick for your order to get executed. For instance, you want to capture 1 point (4 ticks) in the ES. You are gonna have to get a 6 tick move for entry and exit. They may have some sims out now that allow you to adjust that aspect and make price trade thru your resting order to get executed. I don't know. But the ones i have played around with in the past, to my knowledge, had no adjustment. So how does this affect trading. Well, say on a Sim you are practicing a strategy to capture 2 points of the ES. It only requires price touch your entry or exit order and bam you are in or out of the market. In real life it is generally, gonna have to trade THRU your resting order for your entry to get filled. Same with your exit. So on a sim you need 8 tick move to see a RT completed. In real life you need 10 ticks. So, you are practicing on the sim racking up the $$$ and thinking boy this is a piece of cake. You go live and get no where the results you got from the sim. Orders don't get filled per your strategy...if they don't get filled exactly as they would on a sim then that is going to affect the results. Both Sim and live real money trading are live. One is realistic the other is unrealistic. It could be a broker thing to get you to putting real money in an account after siming for a while and thinking "this is easy". So you tell your skeptical wife "honey I am making a killing in the markets and here is the proof..see all these trades and profits...see this 90% win rate...see these tiny losses..see these big profits..and honey all in just 2 or 3 hours a day..wife squints at screen...eyeballs spin around...she says honey are you sure?..you say....there is the proof right in front of your eyes...she says yes...i see that but is it really gonna be this way in real life? You say honey ..the only way we will know is if you go to your saving...and loan me several thousand to try it out..i've practiced and practiced and this is live you know...wife says..ok i will loan you 20,000 but not a penny more...hugs and kisses...your ecstatic..she is smiling but you notice that deep furrow appearing on her forehead. A sure sign of worry. So, you get 20,000 but with a warning...if you lose my money i am gonna kick you $ss all the way into the back yard and you will be sleeping in a tent and subsisting on cherrios and water...............six months later you are camping in the yard. All because of that 2 tick difference. Now your are sleeping with the ticks but wait...these bite the skin....
2) the main reason there is a difference in sim vs real is the pyschological aspect. Most traders study strategies..tactics..techniques..some do back testing and some forward testing on a sim but none of those activities will prepare you psychologically for what you, as a new trader, are about to undergo. You have never developed the skill of detachment. That is, psychologically detaching yourself from your money. Some will tell you .."trade with a small amount that doesn't matter if you lose it" That too doesn't work because 1000 tiny scratches can hurt like a gapping wound. The biggest hurdle to jump over, as a trader struggles to become successful, is developing the skill to transcend your detachment for money and even for your strategy. The markets are extremely flexible and can bend and stretch way out of your parameters. The biggest "rule" to remember is to "go where the market is going" not where you think..devise..predict..or attempt box in with strategies.
Detachment to money, and even ones trading plan, is neccesary to becoming a very good discretionary trader. You cannot stop, or control, emotions and thoughts, even if you think you can. The best you can do is observe them and let them "pass", as they WILL, if you can learn to detach yourself from them. You ARE NOT your thoughts and emotions. But you become them to the extent you identify yourself with them. Your brain is hardwired to protect you from immediate pain and hurt and will find every excuse to do so. It is relentless in this quest. It is also deceptive. It will trick you. Your brain will convince you to widen your SL SO AS TO AVOID the pain of losing on a trade. But to widen it under the present circumstances is to do so for an unwarranted market reasons. The market says just take the loss or exit for a loss but for less than your SL. But you widen it, as your mind will drudge up every time you did so and escaped the pain of losing. Or you jump out of a perfectly good trade that you should ride it some more because your brain convinces you that the market may regress and take away your profit which you now have. This potential profit is giving you pleasure. Your brain is always gonna fight to keep you from pain and prod you towards experiencing pleasure. It may prod you to hold on for more pleasure as last month there 15 times you exited with a profit when, IF, you would have stayed in your position you would have made alot more. So, your brain convinces you to hang in there for more profit (when the market is telling you it is wanting to reverse). And it, i.e. your brain, will dutifully replay all fifteen times you failed to hang in there for more profit. It will at min, incessantly remind you of the biggest profit you lost by exiting early. Thoughts and emotions must be viewed as waters that ebb and flow in and out. Or as a river that flows along. They will pop up in your conciousness for a moment, then recede. You simply CANNOT stop them from popping up. Will power IS NOT the answer. For instance, if I tell you "I DO NOT want you to think of a red rose." The very instance you hear these words your brain is gonna make you think of a red rose and you will not be able to stop that thought from coming. In trading you cannot squish down every thought and emotion out of existence as if it doesn't exist, so that it doesn't influence your trading. But you can manage them by developing the skill to detach yourself, and your trading, from them. Some will argue that is the very reason you need rules and you need to stick to them...as if that is the answer. Nobody ever does so, all the time, and nobody ever will, all the time.. and besides the market knows nothing of your rules and could actually care less about your rules..your math..your indicators....ad nauseum...the market is a river, it is gonna flow where it is gonna flow. The best you can do is attempt to ascertain the best location to jump in the current and to jump out and swim for shore. In other words,"go with the flow" "glide with the currents" AND buy a dupont life jacket not a dandy float tee brand.... ROFLMAO......I hear the protests coming................bye
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Great post. I'd like it twice if I could. Just use some more paragraph breaks next time.
Volpri,,, you are dead on right. my entries and exits in the real world are not as favorable.
and everything else you said.
I am now using a set of alerts for entry and have implemented the Hull moving average to confirm go or no-go.
I have to also realize that the conditions right now for trading suck. I only pulled one trade yesterday.
Can't expect too much at the end of July, I suppose ...
You're deciding whether or not to enter a trade on the basis of the position of the price relative to a moving average? I may have misunderstood you, but conditionally on that, please excuse my saying "rather you than I" ... have you verified that whatever you're doing genuinely has a positive expectancy?
Just regarding your 1st paragraph, volpri, just FYI, I have been trading 3 and 4 contract lots using limit orders for entry, and for exit most times, on a Trade Station sim account (using tick charts) all this month [to be specific, exactly 237 trades]. The sim appears very realistic compared with your story above. I often don't get any fill when the market touches my price at first as previously placed orders, or orders of other quantities, are filled ahead of my order. I often get partial fills and have the market price move away from my price, leaving a partially filled order still open awaiting a fill. I have had the market touch my price 2~3 times before I get a complete fill. It seems to just depend on the depth of orders at my price. (I found out I could buy Depth of Orders data for $5/month, but haven't found I really need it, yet.)
I also have placed many market orders. I have found almost always I get filled at the other side of the bid/ask spread, which has almost, but not entirely always, been 1/4 point [I've been trading ES exclusively so far.] The exceptions have been where there was a spurt of price changes.
I'm counting on this sim experience being fairly realistic when I started trading my real $ account around Aug 1st.
I very much appreaciate this thread & all contributors in at least warning me what I'm facing. I will keep y'all posted as I see my results going live.