Were you one of the world's best traders trading demo?

I thought that this question might start an interesting and useful discussion, as it gets right to the core of why so few traders really become consistently successful. My own opinion is that unless you have reached at least a 100% return on your demo account, you are unlikely to do anything but lose money on a live account. But, even if you have succeeded in doubling or even trebling your demo account, this is by no means a guarantee that you will get anywhere near that on your live account, and this is the paradox, as many of us have found out. It would be interesting to get your thoughts and own experiences of this. Perhaps you made the transition from demo to live easily and successfully, in which case, we all have a lot to learn from you, or perhaps you didn't bother trading demo at all but just started with very small lots on a micro account. Or are you one of the many who couldn't fail to make loads of money on your demo account, but are currently tearing your hair out because you cannot do anything but lose it on your live account? Either way, let's hear from you as we can all learn from each other.

Cat.

i never traded demo .i use altrade demo account to analyze the market i trade live only from 2001 i like to feel the thrill and the move ,the catecholamines adrenaline and nor-adrenaline with music on it is like flying a jet for me

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hey cat.... for some reason the need to 'demo' first did not occur to me.... my first account was a standard, trading full standard lots.....

it took about 1 week to see the reason for the decimal place in that standard lot size....

it took about 1 week more to see even 2 decimal points smaller was still too big....

it took about 1 week more to see the need for a mini account....

it took about 2 years and 20,000 penny a pip micro lots to respect the other side of my trades.....

it took about 2 more years to move back to my long dormant standard account.....

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if a 'demo' does not come first, the micro lot 'penny a pip', which is almost demo, should......h

Hi Cat,

It's an important topic. Your point below is one of the most important for me:

I used to hang out in an environment where I observed a lot of traders aiming to double and treble demo accounts as quickly as possible. It was patently obvious to me that this kind of boy-racer type trading encouraged recklessness because the inordinate risk people placed on their demo dollars competing with one another passed into their live accounts as well (I am aware of at least one person who lost a substantial amount of real money this way). This episode let me to conclude that unless I was able to trade a demo account in the exact way that I would trade a live account then the whole process of trying to double and treble demo accounts was pointless.

IMHO most people get frustrated with the amount of time and effort it takes to become comfortable with the market, which is why I think Hayseed's comments are so important - four years is (I believe) about the average time it's going to take the general retail trader to start to be able to see the setups, understand what may manifest and have the discipline to wait for the best entry. If a person takes the time to develop a trading method that gives him a statistical edge while operating a totally controlled risk profile then I believe there's no reason why the performance on demo cannot be achieved live.

for me i see trading demo - as a test to prove a trading model that one has developed. A risk free chance to see how your model would work in a forward moving market ceteris paribus

Trading demo is a safe environment to test all that works and find out what does not work ...

I have been trading demo for 5-8 months now.

When trading demo one should not look at PL but rather... have i followed my trading criteria.??? etc

Trading demo allows one to develop the mental stamina that they later need when trading live.

Am transitioning to live market.. will let you know how it goes ...

I am very much aware that most fail when they move to a live market... if that is the case one should find out the root cause... was it the strategy? was it my psychology etc? Find the cause and root and deal with it ...

Great start guys, thanks for the input! Personally I traded demo for years whilst I still had a job aside from trading. It gave me the mechanism through which I could test my accumulating knowledge, but it did not give me the discipline and patience to wait for the right trading opportunities - that came from my live account losses. It is one thing to place what turns out to be a big winning trade on a demo account following three consecutive losses from careless trades, but quite another on a live account when those three losses have hurt your pockets and dented your confidence. That's the key for me - demo trade to test and build a winning strategy, but don't expect to be able to take that carefree mind set with you into your live account, perhaps some can, but I think they are few and far between. Most of us have had to work extremely hard to find the right balance between the two sides of the brain that oppose each other, the primitive middle part of the brain that controls emotions and generally wrecks our trading if we don't know how to control it, and the newer frontal lobe section which gives us reason and objectivity. The ancient middle part of the brain, which has stood humans in such good stead for many thousands of years, can have a very negative influence on a trader's mindset when it really matters. It does not really come into play in any significant way when we demo trade because there is no danger, but as soon as we start putting our money on the line, it can override the logical side to create havoc with our account.

The trick, I believe, is to neutralise the emotional part of the brain by making all your actions absolutely methodical, like driving a car. this is why having a really solid methodology is so important, one where you have a cast iron set of rules, as far as is possible, where trades are taken accordingly, without the fear of thinking that you may be wrong. As long as you know your system will give you a certain % of winning trades which translate into profit at the end of the day, week, month, then that is all there is to it. Once you start worrying about whether the trade you are about to put on is going to be a winner or not, you are finished. But it takes time to acquire these emotional skills, a great deal of time as the previous poster alluded to, but it's within the ability of all of us to do so.

Yes I've seen you post a couple of times. Thanks for this, and I really wish you the very best with your live trading. Hope that a couple of things in this thread which have been said so far help you a little in achieving your goals

So true...because because a demo account is just a click away ... we demo traders fail to build the psychology part of trading....

I guess coming from a past of trading live... i think i have tried my best to avoid this pitfall.. each time i kept asking myself " is this how i will trade a live account etc"

If i am to stretch it ... if you feel pain when losing in demo ... you might be on the road to it emancipation

and you are very right Cat.. it takes time to develop the emotional skill set.... but once developed the rewards are awesome...

Thank you for the encouragement...All the best too

May the pips be with us

I wanted to talk about over-analysis paralysis as well, as that's all linked in with our psychology and the need to be right, something that affected and still affects me to a certain degree, but I think I'll leave it to someone else or for another time.

trading is very complicated .. its completely un-natural to our human minds to bet on uncertain future...and that is where our over analysis comes from..

to be comfortable with uncertainty is a trait that grows in each of us.. it does not come at one IMHO

I remember back in the days i used to have over 5 indicators just for me to fire a trade...i guess as times goes and the pain of losing ..we gradually lose the mental shackles that hold us back and ...i believe with time..a trader grows into his own

for me demo is a place for testing system, trial eror and once the system works consistently.. i will test it in real account

I first started trading stocks when "demo" meant paper. So, in Forex, I have never demo traded. Instead I put vertical lines at entries and exits and studied the activity in between. I didn't need validation of "pips" or "fake money". I was more interested in finding consistent entries and exits, than how much "profit" I could have made. Of course, I also do not trade like 95% of people either because during my analysis I figured out how to find tops and bottoms rather than making up stop losses and take profit points and "hoping" I was right. I put more emphasis on conquering the market than pretending to make money with some gimmick or guess. Sorry it that is not helpful, but it is the difference between me, and the other 95%.

I went live after around 4 or 6 weeks of demo and no I did not double my account in that time but I do now from time to time (I withdraw regularly to be comfortable with high leverage). I'm trading for a living now. It's not my only income but my main income.

In my opinion the usage of demo is ranging somewhere between useless to useful in certain things. Demo hat a lot of problems, some of them are not solvable.

* You're trading playmoney, so there is usually no mental stress involved.
* There is no slippage and practically no delay other then the network overhead (I have a ping of under 20ms to my broker, so it's practically nothing). That may not matter for longer term trades, for scalping or some momentum driven techniques it's essentially pointless to try them out in demo.

Comes down to: use demo to get used to the platform.

Real success comes with screen time. I used to do some bodybuilding in the past and the FX newbies remind me of the crowd I used to see in the gym. Always looking for the secret - that bloody holy grail. In the end they were just unable the swallow the truth that success comes with hard AND smart work. FX has the specialty of going against many things we used to believe being the ultimate truth in live or in short "mind set problems" and working on your mindset is probably the hardest thing to do. Catching entries is in fact an easy thing, catching exits isn't too hard either but changing how you react to losses or keep yourself mentally stable while watching a trade that doesn't go in your favor? It's like shitting coconuts. It hurts, it questions a lot of things we used to believe in. It is mental warfare!

The key to have a chance to succeed: steady improvements of yourself and then in your methods or strategy (or however you like to call it).

@dkrock: I like your approach

Hi Cat

Great question and the very core difference I'm sure between winners and losers is to take thier trading skills developed on a demo to a real account. I think the reason guys struggle with the transition is the same reason so many of us fail to succeed at trading, full stop.

Solve this puzzle for yourself and you will become a successful trader.

I recently read Mark Douglas's "Trading in the Zone" book and I gotta say its an awesome book again like you hitting on the difference between winners and losers, as Mark Douglas says when ever he's asked whats the difference between good traders and bad traders. he always answers the same, "its the way they think"...Winners think differently than the majority of losers.

I'm sure if you asked him your question he would answer in a similar vain, that once we switch from demo to live we suddenly start to "think differently" than we did on demo. All of a sudden we start to really care about the outcome of our trades as its real money at risk, whereas before it was more like a computer game with no real consequence to your actions.

But not only that they have to think differently to how the human race has thought for the last 2 million years..That have to think differently from how their brains are hardwired to think. Let me explain as best as I can...

I compare it to the playing a war game on our computers, we all rush around shooting and blasting anything that moves with a totally carefree attitude with no fear of dying. However imagine actually being in that warzone in real life??? What would you act like then?? Would you run around blasting everything in site or might you put the safety of your own life first and ensure you are safely shielded behind some solid wall or such like??? More concerned with preserving your life than taking someone else's???

Moving from trading demo to real money is no different apart from of course your lifes not on the line... Oh no its far more valuable than your life, its your money!!!!!

So what changes?? Fear , real Fear, Fear that is a healthy emotion to have as its whats kept us alive up to now, the healthy fear of dying, stops us running into a busy road without looking. Its fear that stops you jumping off of a cliff to see what it feels like. Its fear thats kept the human species from extinction...

The emotion of Fear is absolutely essential for our survival so its therefore a very difficult emotion to ignore. In fact I'd say its actually impossible to ignore fear. Its the way our brains are wired to react to fear as that's how we have evolved to have a healthy respect for any fears that we feel in our everyday lives.. So if we can't ignore fear how can we ever become successful traders??

One other thing about fear is that it focuses our minds on that fear and nothing else and yet again theres a reason for that. Imagine you're one of your ancestors from many moons ago and you're strolling down a wooded path. When all of a sudden a lion leaps out in front of you licking his lips and looking at you as if you're his lunch.

What do you think your whole mind would be focusing on?? That email you must send when you get back to the office?? Did i leave the gas on when I left home this morning?? Or I wonder if I should wear the green tie or the blue tie with this suit??? I don't think so do you??? No!! Your whole being would be focused on that one threat sitting in front of you licking his lips and snarling with saliva dripping from his mouth.... And absolutely nothing else.

Now tradings no different when we trade with fear in our hearts. But of course its not the fear of a hungry lion when we're trading oh no, its much more fearsome than that. Its the fear of losing our money.. In fact theres four fears at work in trading.

 

1. The fear of missing out.
2. The fear of losing your money
3. The fear of being wrong
4. And last but not least, the fear of leaving something on the table.

Now when we move from the safety of demo trading to the reality of live trading with our actual money is at risk, it all changes..All of a sudden these fears become very real too and hence our performance suffers.

So we have to learn to trade without fear. Its that simple as the demo proves time and time again. Trading on demo without fear is easy and very profitable. But introduce real money and the associated fears and all of a sudden its practically impossible..

So how do we remove fear from our trading after all as I've just explained, our brains are hard wired to have a healthy respect for fear..

there is only one way to remove fear from your trading, you must remove the perceived threat.

its that simple remove the threat and you will remove the fear from your trading...so how to remove our those threats???

You cannot fear the market...You have to totally accept the market for what it is, a completely neutral collection of price action signals. The market is neutral. Unlike the lion, Its not out to get you..Its just the market, its just doing what the market does best. When theres more sellers it will go down , when theres more buyers it will go up. Pure and simple, no hidden agenda, just moves where its suppose to move. It is also a totally random market place which can go up or down at a moments notice, its totally random...

The sooner you totally accept this concept and totally accept it can go any way it wants whenever it wants then the sooner you will be able to trade without fear.

The sooner you will be able to read the neutral signals for what they are.

The sooner you will be able to interpret these neutral signals and take the appropriate action when you need to, cut a loser short, let a winner run. You will be making trading decisions based on the neutral signals of the market and not on your perceived threats, even if that does mean taking a loser.

Your trading will be based on facts not emotions..

Once you totally accept the market for what it is then why should you fear it?? Once you accept you are going to have losers, why should you fear them?? Once you accept you are going to be wrong, why would you fear it?? Once you accept you are going to miss out sometimes, why fear it?? Once you accept you are going to leave something on the table, why fear it??

So coming back to your question about making a smooth transition from successfully trading a demo account to trading real money..

Once you take total responsibility for your trading and have fully accepted the outcome of your trades no matter what they are then you will be trading without fear.

Now if you have an edge, that you've previously proved on demo, then you will be profitable.

Want to know more then read "Trading in the Zone" by Mark Douglas as all I've done here is given you my take on his outstanding book...

Sorry cat just read this post of yours and again its covered in Mark's book. He says when we experience a bad trade we look to blame the market as its taken our money. Therefore our response is to turn back to analysing the market or as you say "over analysing". Or even worst change to a different strategy all together. But remember your strategy worked on demo?? So why change it???

He says that time after time losing traders are looking to blame the market instead of accepting it so look for external reasons for their failure whereas they should be looking within themselves and how they are holding their fear..

Won't keep on about it but if you haven't already read his book do yourself a favour and read it asap....

PS I'm not on commision by the way...

Perhaps "analysis-paralysis" is just the result of an incomplete or partially formed trading method?

One of the best pieces of advise I received when starting out trading was "Learn everything and then throw most of it away". At the time I didn't fully appreciate what the guy was talking about. It's only now a few years later (and having concluded that one of the extraordinary things about trading is that it's the only profession that I can think of where a person must be the student, the teacher, and the author of the curriculum all rolled into one) that his comment makes sense.

In short, my belief is that once a person has learned (what is in his view) "everything", dispensed with most of it to leave a fully formed trading method (obviously the hard bit) then his decision to enter the market becomes binary; either the setup's there or it's not.

I would agree with you entirely here, in that trading, like any new skill, starts out being extremely complicated before is is simplified by usually many thousands of hours of screenwork. The paralysis disappears once a firm, reliable and fully comprehensible method has been found, and yet if we are to believe the failure rate with retail traders, only 5% are able to reach this stage, which suggests there's something much deeper going on, namely the mindset of the individual trader. The psychological component is massive, and is the reason most fail, above and beyond knowledge of the market and having a proven trading method developed over time.

Thanks Clive. Yes, I read ' Trading in the zone' a few years ago. It's great book, but for me it over elaborates an essentially single and fundamental point, which you describe above. I wonder whether you've seen his interview on youtube, where he say the same thing, in my view more succinctly and more effectively. Here it is just in case you haven't.

I don't understand how a majority of traders fail in a live account after being able to successfully and consistently 2x, 3x or even 10x a demo account.
I don't get it.

Unless those traders are :-
1. Overleveraged and got lucky or
2. They trade based on what they feel (aka no trading plan) and have 0% fear because its paper money

The biggest hurdle I can see here that cause them to blow up is either :-
1. They hesitate and don't follow their trading plan (mindset related)
2. They take profits too quickly (mindset related)

Other than those 2 reasons (very very big reasons), I don't see how a majority of demo gurus will blow up their live account.

Can someone clarify my view on this?

Taking this comment and working backwards. If one had:

1. Developed a proven trading method over time

2. Worked hard to gain sound market knowledge, and yet

3. was suffering from the effects of a psychological component that was causing him to fail to execute his comprehensible method on a live account then the answer to the trader's problems must lie somewhere beyond those which can be found in the, let's call it "everyday sphere" (I think even Mark Douglas alludes to this in his book)

Regarding method, 100 trades seems a reasonable enough sample size to judge whether or not a method has merit. If for example, one were to run 100 test trades; each winning trade was 1:1 or greater, the risk per trade was 3% maximum and the win rate was 65% then these stats will grow an account. But let's go further. Let's say that the trader gathered a sample size of 1000 trades and was still able to achieve a 65% win rate in accordance with his risk profile. It would seem more than reasonable at this point to say that the person had found a robust trading method (with everything that this statement implies - statistical edge etc), however, if a trader was then unable to port this method into a live setting, trading micros on say a $1000 account for starters just to see how it "feels" to trade real money then I would agree that there is something much deeper going on. But here's the rub; I'm now more or less convinced that the majority of people (I would include myself in this) are not quite there with their method. And on that basis, this still places them in the 95%.

Edit: To round this comment off I just want to quickly add that I guess in order to be able to develop an answer to the original question and title of this thread one should go back to the demo method itself and the stats, and ask, what is the sample size; what are the stats?