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Don't play games with demo accounts

  • #41
  • Aug 11, 2010 2:42pm Aug 11, 2010 2:42pm
Quoting Jhig
Nowhere does it states that demo trading will help a trader become profitable.
No, they won't help a trader to become profitable but demo is an excellent tool for testing out a strategy, and one's ability to trade it, in very realistic market conditions. If the strategy doesn't work in demo then it's unlikely to work live.


Quoting Jhig
It is a well know fact, demo acct feeds are not reliable nor correct and in most cases, delayed.
I suppose it depends on whose demo you're using, most MT4 brokers demo servers seem fairly reliable and quotes are updated in real time.
  • #42
  • Aug 11, 2010 2:48pm Aug 11, 2010 2:48pm
Quoting SwissRaj
The other use for demo accounts is exploring new markets, new niches.
That too, although someone else mentioned about there being a mandatory quote delay for some markets. I suppose that wouldn't really matter as long as the feed is reliable and the only difference is it's 20 mins behind.

Seems odd though, why do they have that delay on demos, anyone know?
  • #43
  • Aug 11, 2010 6:33pm Aug 11, 2010 6:33pm
Quoting Jhig
DEMO trading is an easy way screw up your Psyche.

Somewhere along the lines, traders have been mis-lead or mis-informed about DEMO trading. Nowhere does it states that demo trading will help a trader become profitable. There are signs that indicate demo's true purpose ... which is to educate a trader on the inter-workings of a specific trading platform. That is all demo trading is good for. In fact, most brokers set time limits on demo accounts because of that fact. Not to be used for analytics, not to be used for strategy testing.

Traders...
Better not have to test too many strategies, or you'll need to get a second job so you can pay to find out which ones work and which ones don't!!

BTW, most brokers limit demo time to control broadband usage. But some, like GFT, will give you a permanent demo when you have a live account.

With novice traders coming to forums to get advice and guidance, is it any wonder why up to 95% fail??.....
  • #44
  • Aug 11, 2010 6:40pm Aug 11, 2010 6:40pm
Quoting pipmutt
That too, although someone else mentioned about there being a mandatory quote delay for some markets. I suppose that wouldn't really matter as long as the feed is reliable and the only difference is it's 20 mins behind.

Seems odd though, why do they have that delay on demos, anyone know?
The stock exchanges are more than happy to supply real-time quotes, but you have to pay for them. Thus the free quotes the exchanges supply are delayed 20 minutes....sort of a marketing ploy to get you to buy real time quotes and to keep those that ARE paying happy (since no one is getting them for free and he is charged).
  • #45
  • Aug 12, 2010 12:31am Aug 12, 2010 12:31am
Quoting moneymaker2
The stock exchanges are more than happy to supply real-time quotes, but you have to pay for them. Thus the free quotes the exchanges supply are delayed 20 minutes....sort of a marketing ploy to get you to buy real time quotes and to keep those that ARE paying happy (since no one is getting them for free and he is charged).
Ah right, makes sense, ta!
  • #46
  • Edited 10:28am Aug 12, 2010 10:17am | Edited 10:28am
Quoting moneymaker2
You are an extraordinary trader, being able to make those kind of pips without ever using a demo or backtesting a strategy, but you must realize that everyone will not be a prodigy like you, so recommending they jump in live without knowing anything would be disasterous for most.

Congratulations on the pips...I assume you are trading full sized lots? (since anything less wouldn't be worth bragging about....)

It's dead simple. Nothing extraordinary about it. Right now if you average in short positions on e/u, g/u and make a promise to your self that you will not close them, no matter what, for at least a month or two, you can probably make the same going the other way. While most people around here are in and out of the market daily I just sit back and wait...and wait and wait. Waiting is the hard part.

Now, back to the theme of this thread. The psychological difficulty. The waiting while you see your pips go +200, them +400, then the market closes for the weekend and it's in the back of your mind...then monday and you see it go down to +300....my god I should sell and lock in my profit.....but you wait and it goes to +700 a week later. That psychology....you cannot learn to do that on demo or backtesting because there is no emotion when it's not real money. And controlling those emotions is the (IMHO) secret sauce of trading successfully.
  • #47
  • Aug 12, 2010 10:54am Aug 12, 2010 10:54am
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting pip_daddy
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.
Are you suggesting the best way to learn how to trade is to put yourself into a financially stressful situation?
How does trading with pennies make you feel like your going to have to sell your car?

If you can't make a profit with monopoly money then what chance do you have with pennies?

I take it your largely a discretionary trader.
For how long have you been profiting consistently?
  • #48
  • Aug 12, 2010 11:24am Aug 12, 2010 11:24am
Quoting Czech
Are you suggesting the best way to learn how to trade is to put yourself into a financially stressful situation?
How does trading with pennies make you feel like your going to have to sell your car?

If you can't make a profit with monopoly money then what chance do you have with pennies?

I take it your largely a discretionary trader.
For how long have you been profiting consistently?
Yes, that is exactly what I am saying. I am saying you need to take out a second mortgage, cash in your life savings. Lay it all on the line. Then just sort of see what happens because now you have nothing to lose. And if it doesn't work out you can kill yourself. That is the plan. So what are you waiting for?

Yes, you obviously 'get it'...........NOT!
  • #49
  • Aug 12, 2010 11:28am Aug 12, 2010 11:28am
Quoting pip_daddy
It's dead simple. Nothing extraordinary about it. Right now if you average in short positions on e/u, g/u and make a promise to your self that you will not close them, no matter what, for at least a month or two, you can probably make the same going the other way. While most people around here are in and out of the market daily I just sit back and wait...and wait and wait. Waiting is the hard part.

Now, back to the theme of this thread. The psychological difficulty. The waiting while you see your pips go +200, them +400, then the market closes...
Good job, sounds like you have it down. But a lot of people can't handle a drawdown of 100-300 pips (which would be somewhat normal holding trades for a month or more, I would think), so they either have to trade mini or micro lots or come up with a method that works on a faster time scale. That's where I think the demo helps; in the development of trading experience.

I agree with the emotional part, but you can't capture that emotion unless you are actually in it....meaning playing with real money microlots or minilots, for that matter, still doesn't have/give the same emotions as trading with full sized lots. So having $50 on the line to see what it feels like to have $5000 on the line still won't be the same. Even trading full lots, having $5000 in a trade won't get you ready for the emotions of having $50000 in a trade.

That is why I think it best to hone your skills on a demo account before you go live because going live to learn is just going to cost you money with very little added benefit of trading psychology (or emotions). Putting that money in a more comfortable computer chair, or a better monitor (or two) or something like that, in my opinion, would get you more bang for the buck when you are learning.

Good trading....
  • #50
  • Aug 12, 2010 11:41am Aug 12, 2010 11:41am
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting pip_daddy
Yes, that is exactly what I am saying. I am saying you need to take out a second mortgage, cash in your life savings. Lay it all on the line. Then just sort of see what happens because now you have nothing to lose. And if it doesn't work out you can kill yourself. That is the plan. So what are you waiting for?

Yes, you obviously 'get it'...........NOT!
Ah nice deflection! Pretty much what i expected. moving on....
  • #51
  • Aug 12, 2010 12:30pm Aug 12, 2010 12:30pm
Quoting pip_daddy
Now, back to the theme of this thread. The psychological difficulty. The waiting while you see your pips go +200, them +400, then the market closes for the weekend and it's in the back of your mind...then monday and you see it go down to +300....my god I should sell and lock in my profit.....but you wait and it goes to +700 a week later. That psychology....you cannot learn to do that on demo or backtesting because there is no emotion when it's not real money. And controlling those emotions is the (IMHO) secret sauce of trading successfully.
"Plan the trade, and trade the plan."

If you had a strategy and a trading plan, and confidence in it and your ability to trade it then you wouldn't need to fight the emotional demons you've described, you would simply trade the plan, relaxed and confident in the knowledge that when it was extensively tested on demo it proved successful. Job done, without any need to suppress your emotions, fight psychology, or unnecessarily put money at risk.

In order to find a solution you first need to identify the problem!
  • #52
  • Aug 12, 2010 2:57pm Aug 12, 2010 2:57pm
Quoting pipmutt
"Plan the trade, and trade the plan."

If you had a strategy and a trading plan, and confidence in it and your ability to trade it then you wouldn't need to fight the emotional demons you've described, you would simply trade the plan, relaxed and confident in the knowledge that when it was extensively tested on demo it proved successful. Job done, without any need to suppress your emotions, fight psychology, or unnecessarily put money at risk.

In order to find a solution you first need to identify the problem!
I have to kind of agree with this. The more confident you are in your strategy, the less you will emotionally stress over your strategy, no matter what the draw down is.

HOWEVER, there is a phase where you first start trading REAL money, where you WILL stress and you WILL be tempted to pull out of a trade before a strategy can be fully executed. Even if you demo your strategy successfully, you will not gain complete confidence in that strategy until you have repeatedly done it successfully with real money.

Both of your arguments are legit.
Binary Options Trader
  • #53
  • Aug 12, 2010 5:50pm Aug 12, 2010 5:50pm
Quoting Yoda_Glenn

HOWEVER, there is a phase where you first start trading REAL money, where you WILL stress and you WILL be tempted to pull out of a trade before a strategy can be fully executed. Even if you demo your strategy successfully, you will not gain complete confidence in that strategy until you have repeatedly done it successfully with real money.
In that case you haven't developed sufficient confidence in yourself and/or your strategy, or the required level of discipline, in order to avoid impulse trades.
  • #54
  • Edited 7:41pm Aug 12, 2010 7:27pm | Edited 7:41pm
Quoting pipmutt
In that case you haven't developed sufficient confidence in yourself and/or your strategy, or the required level of discipline, in order to avoid impulse trades.
Give me a break. Seriously, pal, will ya? You expect anyone to believe that you go from testing your strategy on a demo account to going live with that same strategy with 10k, or 50k or whatever amount of money might be a lot to you, and don't break a sweat. Whatever. You're just debating to be debating at this point....or maybe you're just trading pennies...or maybe you're just super rich that money means the same as virtual money.

First off, there is a whole host of technical differences between demo accounts and live accounts that makes going live different than demos (like slippage, liquidity, etc.etc) So there is no way you can be guaranteed, with 100% certainty, that a strategy on a demo will work with live money. Any broker will tell you that a demo account and live account are not EXACTLY the same. So you're argument is pretty much deflated right there. A strategy is not fully validated until you are putting down your FULL capital on a live account, so there is always that period of uncertainty...despite your demo testing.

A second thing to understand is that no strategy is flawless. Your strategy could be good for 2009 but terrible for 2011. So to speak with this uber God like confidence in any strategy is a foolish mistake.
Binary Options Trader
  • #55
  • Edited Aug 13, 2010 5:10am Aug 12, 2010 11:02pm | Edited Aug 13, 2010 5:10am
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.
Thus, get as many slices of versions of reality as you can -- Jump in with $10k real into NFP *, paper trade a four-year hold, demo $10 until it doubles, run a simulator at top speed, etc.
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.
More like touching a live wire. (The ungrounded appliance buzz just isn't enough.)
I got an incredible chemical rush in my brain when I first stepped into the forex arena of superhigh leverage and neverending opportunity. Physical reactions match the pace of the market, and attention is constantly on the alert.
Jogging is endurance, competes against one's own body to align, willpower and repeat another step, and merges with the changing scenery. Endorphins kick in after a while, and focus afterward is increased tenfold.

(Egad, I just figured why I'm here. The thrill of....
failure?!)

To toughen one's skills with having to adjust to many trading situations, (I would think) can make one a good trader.



* Maybe not this one...
  • #56
  • Aug 13, 2010 2:20am Aug 13, 2010 2:20am
Quoting Yoda_Glenn
Give me a break. Seriously, pal, will ya? You expect anyone to believe that you go from testing your strategy on a demo account to going live with that same strategy with 10k, or 50k or whatever amount of money might be a lot to you, and don't break a sweat.
lol, did I say that? No, what I said was you need to identify the problem before you can find a solution. If you're breaking into a sweat when you trade real money then there's obviously something wrong!

Quoting Yoda_Glenn
A strategy is not fully validated until you are putting down your FULL capital on a live account, so there is always that period of uncertainty...despite your demo testing.
You kind of miss the significance of developing strategy, trading plan, and discipline, and the obvious place to develop those skills is on a no-risk demo account.

Quoting Yoda_Glenn
A second thing to understand is that no strategy is flawless. Your strategy could be good for 2009 but terrible for 2011. So to speak with this uber God like confidence in any strategy is a foolish mistake.
That's why we accept that we're trading probabilities, not certainties, nothing is guaranteed. Surely that's one of the first things we learn and accept when we get into this business, risk.


Sorry, if you think "putting down your FULL capital on a live account" is in some way going to magically condition you, alter your psychology, or help you to control your emotions then you're barking up the wrong tree.....or just plain barking!

I'm not arguing with the idea that exposure to a variety of different real live trading situations won't help you gain experience, obviously it will, but the idea that the only real way to prepare oneself for live trading is to get down and dirty in the trenches with muck and bullets is just ludicrous! Show me one profession or sport (seeing as we've had sporting analogies!) where that's the recommended way of going about things.....
  • #57
  • Aug 13, 2010 3:09am Aug 13, 2010 3:09am
Quoting pip_daddy
Your analogy is completely wrong. A doctor can kill a patient. You cannot equate that will blowing a $100 account.
A veterinarian doctor killing a hamster? Not sure if hamsters would agree, though.
Gone to a better place
  • #58
  • Aug 13, 2010 3:13am Aug 13, 2010 3:13am
You must trade demo accounts. It's an essential tool. Then probably a small real account.

But you can't beat a proper account using proper money. It makes you wait for the best set ups and prevents overtrading.
Gone to a better place
  • #59
  • Aug 13, 2010 5:40am Aug 13, 2010 5:40am
Demo is great for testing eas and scripts, even if it's just for debugging. Anyone who has ever made an ea knows that there will always be bugs. About the exercise analogy in the first post: I remember reading some research when I was in uni that said that visualisation of exercise does actually increase muscle strength in said exercise. This makes sense as the most important factor in exercise is the training of your nerve system. I don't know how this relates to trading though, I often visualise the market to go my way but it seems to care very little for my thoughts...
  • #60
  • Aug 13, 2010 7:28pm Aug 13, 2010 7:28pm
Read this thread with interest since I'm a rookie myself.
For me it's a little bit of both.

I use MT4 and it is necessary for me to have a demo account just to learn the software itself. On that I think all can agree that a demo-account is good.

Been doing some trading on my demo-account for about three weeks and I fell that has given me some time to learn more about the pair (EUR/USD), patterns and so on.
But if you treat your demo-account as a complete playground and do things you would never do in a real trade, then I see no use of a demo-acocunt.

But (without even done real trade) I quite easily realize that there is a big difference between demo and live trading. It's the same as poker.
You could do playmoney for months and stack up your account with tons of money only to loose them in real play. I belive most people tend to take more risks on any demo of anything compared to real money, and if you trade too long on a demo-account you might raise your risktaking limit too high.

I'll keep with the analogy of poker..
If you start playing with real money at tables with blinds at $0.05 and $0.10 it still won't "sting" you that much even if (when) you loose.

So my conclusing is do some demotrading, set up a trading plan, test it, do proper MM and then go to a live account. Then it's up to each and everyone to find their lowest "sting" level.. where does it hurt a bit loosing? For some it might be a micro.. others a mini and so on.
I belive that simulation might prepare you a bit, but does not beat the real thing.
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