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Don't play games with demo accounts

  • Post #1
  • Quote
  • First Post: Edited 11:50pm Aug 10, 2010 12:51pm | Edited 11:50pm
I am not a fan of demo accounts or back testing for one simple reason. It's not real.

Imagine you are playing some battlefield video game. Do you feel anything when you get hit by shrapnel? Do you care if you get killed? Does your score really mean anything to you other than bragging rights?

Now imagine you are playing a video game of someone jogging. Probably not an exciting video game but that's besides the point. Now, does your stamina improve playing that video game? Do you feel the pain when you jog up hill? Do your muscles get sore?

Trading requires psychological training just like jogging requires physical training. You cannot improve your ability to suffer loss and prevent emotions from clouding your judgment without training and you cannot do that without using real money that has real consequences to you.

I think you get my point. So get off that demo account ASAP and start trading for real. You can open an account at many brokers for as little as $100 and trade for as little as 1 penny a pip. So what are you waiting for?
I think you misunderstand the real purpose of demo accounts!

A $100 account and a penny a pip isn't going to condition you for anything psychologically, in fact it can do more harm than good.

Using your analogy of a battlefield game, would you be better equipped to go into battle for real if you had tested your strategy and survival skills on a realistic simulated battlefield, or would you be better off with no prior knowledge, experience, training, or planning? It obviously wouldn't prepare you for the realities of war but if you have a predefined plan which you know works because you tested it rigorously in a simulated environment then you can apply it with discipline, and that in turn helps overcome psychological issues in the heat of the moment, your training takes over. Isn't that what training exercises are for in the army?

I can't think of one other profession where people would jump in the deep end without a lot of education, qualifications, and then practical experience under supervision.
While I agree that exposure to a live account is likely to refine and hone one's trading abilities, it is with respect that I disagree with the key message in original post. Trainee doctors don't practice their skills on real patients - they practice on dead people. The psychological element of interaction with a real human comes later.

While a good attitude is required from the start, 'good trading psychology' is largely an output of a good method; troubled trading psychology is an output of a problematic or flawed method. It is sometimes easy to confuse the symptoms with the cause.

For sure, trading a demo account needs to be undertaken with a clearly defined PURPOSE and LEARNING OBJECTIVES (otherwise what is the point?) but too many would-be traders get carved up by trading with real money when they just aren't ready. It is also true that if you take a more structured and measured process to demo trading, supported by clear objectives and a good learning process, then the transition to a live account is likely to be less troublesome. Take your time; do it properly.
What pipmutt says...
The physical exercise metaphor for trading is moronic, a better metaphor would be juggling chainsaws, one better learn to juggle tennis balls first.
The breaking of a wave cannot explain the whole sea.
DEMO should only be used as a method of familiarizing oneself with the brokers platform. Nothing more.
For the most part, I agree. Demo trading is merely there to orientate you toward a broker's platform or maybe give you a basic understanding of how the mechanics of trading work.

In Binary Forex Options, however, you have to trade with real money because the demo accounts are nothing like the real thing (there is no liquidity in Binary Forex Option Demo accounts.)

Probably 80% of trading is dealing with the tremendous emotional strain and emotional control that is needed to becoming a successful trader. Unfortunately, play money doesn't offer any of that.
Binary Options Trader
Quoting pipmutt
I think you misunderstand the real purpose of demo accounts!

A $100 account and a penny a pip isn't going to condition you for anything psychologically, in fact it can do more harm than good.

Using your analogy of a battlefield game, would you be better equipped to go into battle for real if you had tested your strategy and survival skills on a realistic simulated battlefield, or would you be better off with no prior knowledge, experience, training, or planning? It obviously wouldn't prepare you for the realities of war but if you have a predefined...
100% agree
Time hides Nothing
Quoting Jhig
DEMO should only be used as a method of familiarizing oneself with the brokers platform. Nothing more.
I completely disagree, and for the sake of rookies reading this thread I will briefly elaborate why.

I have been trading for over 8 years (ok not a lifetime, but long enough) and it is what I do for a living. I continue to maintain a demo account for testing purposes and it continues to be an integral part of my ongoing learning process. Demo accounts are useful for many more things than "broker familiarisation" and it's up to the individual to determine how best to exploit the excellent opportunity a demo account brings - crap inputs leads to crap outputs; a good method input leads to good learning and good results out.
Quoting pipmutt
I think you misunderstand the real purpose of demo accounts!

A $100 account and a penny a pip isn't going to condition you for anything psychologically, in fact it can do more harm than good.

Using your analogy of a battlefield game, would you be better equipped to go into battle for real if you had tested your strategy and survival skills on a realistic simulated battlefield, or would you be better off with no prior knowledge, experience, training, or planning? It obviously wouldn't prepare you for the realities of war but if you have a predefined...
I think YOU misunderstand what I am saying. Is jogging to the curb and back gonna condition you for jogging? No and neither is trading a penny a pip. But tomorrow you can trade 2 pennies a pip. Next week maybe you feel ready to trade 10cents a pip. And so on. But even a penny a pip is better than nothing (ie. demo account).

Also, what you describe as doing on a demo account is learning how used the software and the mechanics of executing trades. Of course you want to do that but most people can figure all that out in a few days. I am talking about trading with real money ASAP and assuming we have already figured all that stuff out on a demo account. There are guys who have been on a demo account for a year or more. That's not gonna get them anywhere. In fact they may be making it even harder on themselves.
Quoting Hedginghog
While I agree that exposure to a live account is likely to refine and hone one's trading abilities, it is with respect that I disagree with the key message in original post. Trainee doctors don't practice their skills on real patients - they practice on dead people. The psychological element of interaction with a real human comes later.

While a good attitude is required from the start, 'good trading psychology' is largely an output of a good method; troubled trading psychology is an output of a problematic or flawed method. It is sometimes easy...
Your analogy is completely wrong. A doctor can kill a patient. You cannot equate that will blowing a $100 account.
Quoting Craig
What pipmutt says...
The physical exercise metaphor for trading is moronic, a better metaphor would be juggling chainsaws, one better learn to juggle tennis balls first.
As 'moronic' as operating on real patients is a metaphor to trading a $100 account? LOL!

Your metaphor isn't much better but feel free to run with that if it makes you happy.

Unless of course if you never learned proper money management so maybe the metaphor does make sense.....to you. But how are you able to type without any hands? Do you use your toes?
If the difference between you trading well and not trading well is your emotional attachment to money then sure maybe a demo account won't help much with this

BUT...

Demo for me is simply a means to improve my trading method, simple as that.

Whats the point putting money (however small) into the market when you know nothing about trading in the first place? Its backwards

I think your first post is poor advice for new traders - forget all the metaphores if you can't trade on demo you will never be able to trade live. Its agreat way to learn the market if you can do it objectively

And in turn when you finally do go live you will (hopefully) have much more confidence with what you are trying to achieve and so the emotional attachment to the money will also be less.

Theres no right way to do anything really thats why these sort of threads piss me off. If it works for you great , go do it but does that mean it will be the same for everyone else?

I think the best asset a trader can have is learning ones own way and discovering things for themselves instead of blindly following illfounded presumptions of others. Myself included (!)
Time hides Nothing
Quoting pip_daddy
Your analogy is completely wrong. A doctor can kill a patient. You cannot equate that will blowing a $100 account.
Whatever works for you, my friend. Just keep in mind we are posting in a rookie forum here. Best of luck with your $100 account. I hope it goes well for you.
Quoting pip_daddy
Is jogging to the curb and back gonna condition you for jogging? No and neither is trading a penny a pip. But tomorrow you can trade 2 pennies a pip. Next week maybe you feel ready to trade 10cents a pip. And so on.
Staying with your jogging for a minute....
Ok, so in your opinion it's better to jog to the curb and back and build up to a marathon rather than learn about jogging first before even stepping out on the pavement for real? Sure you could do that, and maybe get lucky, but you stand a better chance of success and survival if you first learn about diet, hydration, correct clothing, warm up and cool down exercises, heart rate, technique, safety etc etc etc. Jogging looks simple but to do it properly and avoid all sorts of potential problems it requires preparation, knowledge, and understanding. Any idiot can click Buy or Sell but doing it right is something else.

Quoting pip_daddy
But even a penny a pip is better than nothing (ie. demo account).
Why?

Quoting pip_daddy
Also, what you describe as doing on a demo account is learning how used the software and the mechanics of executing trades.
Yeah that wasn't me who said that....
Just want to say one more thing...

Personally when I am on demo its not a "game" to me like you suggest. If my results are bad this pisses me off as much as if the money was real because its a reflection of my trading in general which is the overall goal right?

If you can form the right mindset when trading demo then it can be just as effective in regards to emotional training and result progression.

this is harder to do when you're new because you may still have that unrealistic view of the market that we all have when we start out.
Time hides Nothing
The mind cannot distinguish between what is real and that which is vividly imagined. To the extent that athletes who meditated upon jogging actually experienced physiological changes and improved performance as compared to a control group. There is no flaw in the exercise of demo trading, it only comes down to attitude; the point being - if you're going to do it, take it seriously.
Quoting birdt
The mind cannot distinguish between what is real and that which is vividly imagined. To the extent that athletes who meditated upon jogging actually experienced physiological changes and improved performance as compared to a control group. There is no flaw in the exercise of demo trading, it only comes down to attitude; the point being - if you're going to do it, take it seriously.
Well said - what I was trying to say but couldnt - Like your sig
Time hides Nothing
A demo account in currency trading is a great opportunity to learn your craft. It is real time and pretty much exactly like the real thing (unlike stock trading demos that have the required 20 minute minimum price delays). You learn how the broker platform works, you can set up your charts however you want and change them as needed. If you try something and it fails, you just move on until you find your own trading method.

Is trading with real money different that trading a demo?....well, that is a matter of opinion and how you trade on your demo. If you open up a demo with $50K, you may get a false sense of your trading abilities (unless you plan on opening up your real account with $50K). But if you open the demo account with the amount you are going to actually be trading and treat the demo as a learning tool I firmly believe if you can make money on the demo, you can make money in a live account.

What would be the point of jumping in with real money, no matter what amount, to learn how to trade? I think that is just bad advice for a beginner. People say all the time "So what if you blow $100 account a few time? Consider it tuition." Well, to me, you are just throwing money away when you don't have to lose it. Some people talk about the number of accounts they've blown like a badge of courage...I've never really understood being proud of the money you've lost. Losses are inevitable in currency trading, so why do anything that is going to lose money while you are learning?

Like Hedginghog, I have traded live for years and still use a demo nearly every day to attempt to learn more of my trade (I still paper trade for daytrading options since ther is no demo for that). A demo is one of the most useful tools in our profession, you just need to use it to your advantage.

In my opinion, it all depends on how you use your demo as to whether you are successful in your transition into live trading. And if people trade a demo for a year before going live, so what? There is no honor is saying "I trade live"...but there is in saying "I trade live and I make money".

Okay, I am off my soapbox now....
Quoting CindyXXXX
If the difference between you trading well and not trading well is your emotional attachment to money then sure maybe a demo account won't help much with this

BUT...

Demo for me is simply a means to improve my trading method, simple as that.

Whats the point putting money (however small) into the market when you know nothing about trading in the first place? Its backwards

I think your first post is poor advice for new traders - forget all the metaphores if you can't trade on demo you will never be able to trade live. Its agreat way to learn...
Psychology is EVERYTHING. It comes before MM because it makes the difference between good and bad MM. If you haven't learned that well.........best of luck. Feel free to just say I am wrong and carry on with whatever it is you do.
Quoting birdt
The mind cannot distinguish between what is real and that which is vividly imagined. To the extent that athletes who meditated upon jogging actually experienced physiological changes and improved performance as compared to a control group. There is no flaw in the exercise of demo trading, it only comes down to attitude; the point being - if you're going to do it, take it seriously.

If you are able to convince yourself that demo is real and that blowing your account means you have to sell your car (or whatever) then that is quite impressive.
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