How many of you, still prescribe demo trading to others? | Forex Factory

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How many of you, still prescribe demo trading to others?

  • #1
  • First Post: Jan 21, 2019 6:24am Jan 21, 2019 6:24am
How many of you pro's still prescribe demo trading to new traders out there-prescribing it even to those new traders,that know how to use mt4/mt5 or any trading platform,and can execute and close trades efficiently??
If you do (prescribe)...DO YOU THINK THIS IS A GOOD IDEA?

I ask this because i have met so many people that are demo trading champs-but when it comes to the real deal,they choke,they get performance anxiety and they just can't perfom.Some i know have actually even give up.They were brilliant demo traders and very bad live traders.

DO YOU STILL THINK ITS A GOOD IDEA TO PRESCRIBE DEMOS TO NEW PEOPLE WHO KNOW THEIR WAY AROUND THE TRADING SOFTWARE.
(SHOULD'NT WE ONLY PRESCRIBE DEMO FOR LEARNING MT4 AND PLACING AND EXITING TRADES)

Why practice on an M16A4 rifle while you are going to be using an M240B machine gun out on the field??
  • #2
  • Jan 21, 2019 2:05pm Jan 21, 2019 2:05pm
Quoting EXpRINCE
How many of you pro's still prescribe demo trading to new traders out there-prescribing it even to those new traders,that know how to use mt4/mt5 or any trading platform,and can execute and close trades efficiently?? If you do (prescribe)...DO YOU THINK THIS IS A GOOD IDEA? I ask this because i have met so many people that are demo trading champs-but when it comes to the real deal,they choke,they get performance anxiety and they just can't perfom.Some i know have actually even give up.They were brilliant demo traders and very bad live traders. DO...
I'm an aspiring pro, I would not call myself a pro. I'd still recommend demo for a couple of months, but adjust account size to what live will be ( I think you can do that ). Default demo account size when I started was $50k which is ridiculous. I think demo default account should be $500, less likely to set clients up to fail. I also think the training wheels need to come off after 2 months, even just trading .01 on $200 account. When I started I thought well if I can make $20/day on small account, no dramas making $200/day on larger account which is not the case at all. Being good at the 1m springboard doesnt make you a champ at the 10m tower. I have found the emotional aspects of upsizing my trades challenging, but I can now trade 1lot up to 4 trades at a time ok. I think that's the other piece of advice, dont stagnate at same level. If you are good at .01lots, increase size slowly but dont go crazy. It's taken me 4000 odd trades and 3.5 years to advance
  • #3
  • Jan 21, 2019 2:35pm Jan 21, 2019 2:35pm
Quoting hellsbells
{quote}Default demo account size when I started was $50k which is ridiculous.
Exactly! Now a lot are up to $100K. All that does is mask mistakes and gives you a false sense of security. I always tell those that want my advice to open a demo, and if they can't adjust the demo amount, then put in some super stupid trades so they can lose down to the amount they would actually be putting in a live account. Once you get it to whatever your deposit would be, it is much easier to pretend it is real.

I do think that demos are needed to figure out any strategies or test ideas. If a friend of a friend of a friend's mother said to always place a sell order on the third 4h candle of the day on anything/JPY, you certainly don't want to waste real money to figure out that is totally a dumb idea.

But if people are brilliant demo traders, logically they should be good live traders unless they were maybe nonchalantly trading large sums of fake money rather than trading the way they actually would with a real dollar amount. But if they choke, get performance anxiety and just can't perform live after trading demo, they would probably be worse if they just went straight live with no demo and the first 5 trades they made lost real money!
  • #4
  • Jan 21, 2019 2:40pm Jan 21, 2019 2:40pm
Definitely. If an aspiring trader cannot maintain the same discipline on demo that is required to trade and make money on a live account, then he/she is a failure waiting to happen.
  • #5
  • Jan 21, 2019 2:40pm Jan 21, 2019 2:40pm
For my part, demo trading is an invaluable tool for the following reasons:

  1. Learn to accurately use the software without costly mistakes that could/should be avoided.
  2. Research and development of a new or existing trade theory... again without costly mistakes.
  3. Anytime you have taken a long break from trading and wish to start anew
  4. Anytime you want to "tweek" or adjust any new Trading perameter on your existing method to measure actual "live" in the market results - BEFORE full implementation.
  5. Anything that is untested before you place any capital at risk.

It only makes sense to test and verify first. Just because someone else can do it... doesn't mean you will have the same results... rushing to live trading simply shows impatience which is almost always a precursor to losing behavior.

@xxxx§|[::::::::::::::::>
  • #6
  • Jan 21, 2019 3:02pm Jan 21, 2019 3:02pm
The trouble will Demo trading is that graphs are not that accurate, as the data is somewhat manipulated

In my opinion demo trading will only teach you how to use the platform and not much else. Much better to open a small account and trade the smallest you can, that way you get a bit of emotion as well!

The method you trade doesn't really matter, it's your emotions that'll destroy you...................

Demo trading is false, traders can make fortunes on demo but on live just can't do it. It's similar to armature sports people who, when there's no money on the line, do really well! Then they turn pro and it all falls apart, happens in golf a lot apparently
  • #7
  • Jan 21, 2019 3:41pm Jan 21, 2019 3:41pm
Quoting rover99x
Much better to open a small account and trade the smallest you can
Yes -- I strongly suggest jumping in with a Real micro-account. Learning to trade is sort of like learning to swim. You can be taught various techniques in the classroom and practice exercises on dry land, but it ain't the same as being in the water.

Just as there is a "disconnect" between back testing and Demo accounts, there is also a "disconnect" between Demo and Real accounts. Depending on your broker, Demo and Real accounts may use different data. Also, a Demo account does not include the round-trip to the investment bank (i.e. your broker's liquidity partner).

Demo accounts are like a sandbox -- a place to play and get a general idea whether your trading strategy (mechanical manual or algorithmic) looks promising. But if you spend too much time in the sandbox you'll never leave -- because you've got lots of (Monopoly) money there and it feels SAFE. If you want to trade Forex then, as Nike says, "Just do it". Yes -- you may lose a few bucks in the micro-account -- so what... The "street smarts" you learn more than make up for that.
  • #8
  • Jan 21, 2019 4:14pm Jan 21, 2019 4:14pm
Quoting EXpRINCE
How many of you pro's still prescribe demo trading to new traders out there-prescribing it even to those new traders,that know how to use mt4/mt5 or any trading platform,and can execute and close trades efficiently?? If you do (prescribe)...DO YOU THINK THIS IS A GOOD IDEA? I ask this because i have met so many people that are demo trading champs-but when it comes to the real deal,they choke,they get performance anxiety and they just can't perfom.Some i know have actually even give up.They were brilliant demo traders and very bad live traders. DO...
demo trading ?????
do pilot learn to fly on paper planes ????
trying to make everyday the best risk/reward decisions possible
  • #9
  • Jan 21, 2019 4:29pm Jan 21, 2019 4:29pm
Quoting slowbrain
{quote} demo trading ????? do pilot learn to fly on paper planes ????
No they don't, but I've heard fighter pilots learn on a simulator, which is kinda like a demo..
  • #10
  • Jan 21, 2019 4:40pm Jan 21, 2019 4:40pm
Quoting DojiSan
{quote} No they don't, but I've heard fighter pilots learn on a simulator, which is kinda like a demo..
but they dont learn to fly on simulators ...

simulators are used to let people adjust complicated controls to fly a jetliner through different weather and landing conditions , they are just ideal complement to formal flight training and real world flying
trying to make everyday the best risk/reward decisions possible
  • #11
  • Jan 21, 2019 4:54pm Jan 21, 2019 4:54pm
Quoting DojiSan
{quote} No they don't, but I've heard fighter pilots learn on a simulator, which is kinda like a demo..
Fighter pilot simulators are extremely realistic - and - it is difficult to find an opponent for a live fire engagement.

IMO, real trading should always be in a live account, starting at the micro level.

Use demos for evaluating strategies and apps, which is not real trading.

If just starting out, demos are okay for a short time, best with a realistic account size.
  • #12
  • Jan 21, 2019 5:00pm Jan 21, 2019 5:00pm
i think it's good to give demo trading a go to understand how the system (mt4 or whatever platform works) so you are familiar with all the buttons and functions

then open a small live account for actual paper trading because people react differently when they have money in the game
  • #13
  • Edited 10:52pm Jan 21, 2019 5:07pm | Edited 10:52pm
Quoting slowbrain
{quote} but they dont learn to fly on simulators ... simulators are used to let people adjust complicated controls to fly a jetliner through different weather and landing conditions , they are just ideal complement to formal flight training and real world flying
Very true, as most any skill comes from actually doing it rather than pretending to do it. But even the planes (trainers) most people learn to fly on has duel controls and an instructor sitting next to you. Probably not a good outcome if the student was just pointed in the direction of the plane, handed the keys and told to get some "street smarts" under their belt.

Trouble with going live right away in trading is that you don't have the instructor there to keep you from crashing and burning! At least if you crashed and burned on a demo, you haven't lost money and hopefully learned what not to repeat again....
  • #14
  • Jan 21, 2019 5:17pm Jan 21, 2019 5:17pm
Quoting moneymaker2
{quote} Very true, as most any skill comes from actually doing it rather than pretending to do it. But even the planes (trainers) most people learn to fly on has duel controls and an instructor sitting next to you. Probably not a good outcome if the student was just pointed in the direction of the plain, handed the keys and told to get some "street smarts" under their belt. Trouble with going live right away in trading is that you don't have the instructor there to keep you from crashing and burning! At least if you crashed and burned on a demo,...
the problem with demo is;

trading is about

20% the system
30% the money management
50% emotions ....

so demo trading miss the most important part
trying to make everyday the best risk/reward decisions possible
  • #15
  • Edited 10:53pm Jan 21, 2019 6:10pm | Edited 10:53pm
Quoting slowbrain
{quote} the problem with demo is; trading is about 20% the system 30% the money management 50% emotions .... so demo trading miss the most important part

I'm apparently wired a little differently than most, so I think that the system is like 80%, and the other two split up the remaining 20% in no particular order. I feel if you have a good, solid method that has a high performance rate, that in itself takes care of the money management issue for the most part, and emotions follow to become less and less. Most MM "systems" are based on surviving a lot of losses because the method is sorta expected to lose almost as often as it is profitable. With a good method, you don't have to focus so much on 1/2 of 1% total equity with a drawdown ratio of whatever and a risk of less than 1.2 not to exceed 1.578 or something like that. If you have a high confidence method that works for you, you trade as though you have high confidence. Pretty soon you are trading multiple full lots making the same trades you were making trading 0.02 lots.


I also think most negative emotions stem from not having a good system (or method, or pattern or whatever works for you) so when you get in a trade, you are stressed until it is over, one way or the other (SL or TP). I mean, if you say "C'mon, baby" or "I hope" or "Please.." within 60 seconds of opening a trade, that is not a high confidence system ya got there!

  • #16
  • Jan 21, 2019 7:32pm Jan 21, 2019 7:32pm
Quoting moneymaker2
{quote} I'm apparently wired a little differently than most, so I think that the system is like 80%, and the other two split up the remaining 20% in no particular order. I feel if you have a good, solid method that has a high performance rate, that in itself takes care of the money management issue for the most part, and emotions follow to become less and les. Most MM "systems" are based on surviving a lot of losses because the method is sorta expected to lose almost as often as it is profitable. With a good method, you don't have to focus so much...
Fully agree. I recommended no demo trading. No point test drive bad systems. No point test drive good systems either. Rookies being who they are won't buy it.
  • #17
  • Jan 21, 2019 10:45pm Jan 21, 2019 10:45pm
Everyone talks about "emotions" -- but I'm not so sure. Yes -- emotions come into play, but even experienced traders have emotions.

I develop indicators and EAs and mostly trade algorithmically (though sometimes, for fun, mechanical manually). And I've had the experience of EAs performing well in Demo accounts and then poorly in Real accounts. Since these are EAs -- there's no emotion involved, right?

So -- that was really frustrating. Turns out that Demo and Real accounts are sufficiently different that even when you've experienced some success in your Demo account it may perform poorly in a Real account. I wouldn't say it necessarily fails -- rather, performance is different. At this point your confidence takes a hit.

There's a few problems with Demo accounts and this probably applies more to algorithmic trading than mechanical manual -- though still worth considering.

1. Most EAs need to be "calibrated" for a particular symbol, time frame and data horizon. Since the indicators used by EAs are simple algebraic formulas whose constants were calibrated sometime in the past using historical data, then those constants need to be periodically recalibrated. If you hang around a Demo account for weeks or months and then move that EA to a Real account then it may not perform well because the market's data pattern has changed over the past few months. So, you need to recalibrate.

2. For many brokers, the data stream for Demo accounts is different than for Real accounts. I don't necessarily think there is anything devious going on -- rather, data costs money and since there are so many Demo accounts out there then the broker may save money by reserving the latest and greatest data only for Real accounts -- though I'm not sure about this. What I am sure about is that the data streams can be different.

3. Spread and swap are different.

4. With a Demo account there is no round-trip to the investment bank (i.e. the broker's liquidity partner) -- and this is an important point.

The flight simulator analogy is not a good one. If you make a mistake flying a plane that's a life and death proposition. Trading forex is not life and death. When you're beginning with a Real account you may lose a few dollars -- so what. Tell your wife you'll take her out for dinner next week -- she'll understand... That's quite different than crashing an airplane.
  • #18
  • Jan 21, 2019 10:47pm Jan 21, 2019 10:47pm
Quoting EXpRINCE
How many of you pro's still prescribe demo trading to new traders out there-prescribing it even to those new traders,that know how to use mt4/mt5 or any trading platform,and can execute and close trades efficiently?? If you do (prescribe)...DO YOU THINK THIS IS A GOOD IDEA? I ask this because i have met so many people that are demo trading champs-but when it comes to the real deal,they choke,they get performance anxiety and they just can't perfom.Some i know have actually even give up.They were brilliant demo traders and very bad live traders. DO...
Mate; practicing demo doesn’t mean everything will be fine in real; Forex is not simple job. By the way, what’s your alternative instead of demo without any fee? I’m curious to know.
  • #19
  • Jan 21, 2019 11:45pm Jan 21, 2019 11:45pm
Demo trading leads to false expectations. Trade small with real money and real quotes. There is a huge difference between watching porn and having actual sex. This applies to trading also.
If you are good at something, never do it for free--Joker
  • #20
  • Edited 1:00am Jan 22, 2019 12:19am | Edited 1:00am
Quoting jmn5611
There is a huge difference between watching porn and having actual sex. This applies to trading also.
@jmn5611 -- maybe we should start a new thread -- "Trading is like...".

Let's see -- so far, I've used swimming, @slowbrain and @moneymaker2 used flying, you used sex. I suspect there are a few more out there. It might be interesting (and humorous) to hear some other analogies.
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