Is demo trading useless? | Forex Factory

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Is demo trading useless?

  • #1
  • First Post: Mar 18, 2016 4:49am Mar 18, 2016 4:49am
So I've been having some very good success by increasing lot sizes linearly but have lost a lot of money by increasing lot sizes bases on martingale. It's working very well on demo and paper(theory) but in practice my winning percentage takes a hit because of even slight slippage or widening of spread at the wrong bloody time. And then there is the bloody margin call.

Has anyone here been able to do demo testing properly. Is there a way to do it taking into account these factors and realistically demo the system? Any ideas would be welcome. No micro orders because I don't believe brokers offering micro orders can be ECN. Dukascopy itself claims that it MAY trade against the client. I contacted them and they said they are counter party or something. It's difficult for me to understand what they said but it seems they also do that. I trade with them because average spread is as close as possible to their lowest spreads.

Are my trading orders going to the interbank market? Can Dukascopy Bank be the counterparty of my trades?
Notwithstanding the fact that the SWFX – Swiss FX Marketplace is an ECN, Dukascopy Bank is the counterparty of all its clients’ trades executed on the SWFX. Dukascopy Bank sends orders to the interbank market in its own name for its own needs such as hedging exposures and/or testing validity of prices received from liquidity providers. Not all clients’ trades necessarily result in hedging orders sent to the interbank market by Dukascopy Bank. In particular small trades cannot be hedged with external counterparties and therefore could hardly be executed without Dukascopy Bank’s liquidity, since external counterparties may not accept trades under a certain minimum size. Also, to date, trades on binary options cannot be hedged. Dukascopy Bank hedges clients trades fully, partially or not in accordance with its hedging technology, needs and banking regulation.
  • #2
  • Mar 18, 2016 10:21am Mar 18, 2016 10:21am
I think demo is best platform to learn trading. It is not useless. I personally learn most of techniques in demo .It teach me basic trading, using of tools , indicators and specially risk management experience helped me a lot in real trading.
  • #3
  • Mar 18, 2016 11:07am Mar 18, 2016 11:07am
In the demo you can trade without experimental psychological pressure. You can check the strategy. In the demo, you can learn. Although, after the demo account is not so easy to go to the real one. Completely different conditions.
  • #4
  • Mar 19, 2016 3:25am Mar 19, 2016 3:25am
Demo trading is not useless. I am new trader, learning from Oct. 2015 in MT4 Demo account. It teaches you how to prepare for Real Trading, like a school from Nursery class to College Degree

You learn how to use tools, indicators and setup your own style of pattern / template etc. In demos account, pips spread, margins are low from real accounts. And in demo there's no fear to loose money.
  • #5
  • Mar 23, 2016 9:33pm Mar 23, 2016 9:33pm
a demo account is particularly crucial for traders because the demo account will allow us to practice the skills of good trading. Increased skills will help us to be able to improve trading results. By using the demo account then we will be able to improve skills with a demo account trading and we can understand MetaTrader
  • #6
  • Mar 24, 2016 6:45am Mar 24, 2016 6:45am
Yes it is......
Unless u apply a system each and every time with a trading plan...
Trade fearless not careless...
Syed Mohsin Ali Profit This Month: -136
  • #7
  • Mar 24, 2016 7:00am Mar 24, 2016 7:00am
Don't know about extreme scalping at lower TFs, but when you trade at higher TFs, demo experience (using demo account from reputable brokers) is identical to live. If can make money from demo, you can make money from live as well. Period.
Simplicity is the ultimate sophistication - Leonardo da Vinci
  • #8
  • Mar 24, 2016 7:08am Mar 24, 2016 7:08am
Demo trading is useless "unless" you're automating trading (Using EA/bots to trade)

As soon as you go live, your psychological side starts to play and you do not see even close results. Because you're not a robot. It's human nature
  • #9
  • Mar 25, 2016 9:16am Mar 25, 2016 9:16am
At first I liked demo trading. To strongly not to be nervous on the opening of orders on a real account, I first opened order on demo. When I saw that it was going in the right direction to me I opened on the real. Yes, earnings was less, but had less nerves also.
  • #10
  • Mar 25, 2016 9:23am Mar 25, 2016 9:23am
Quoting midouch
Demo trading is useless "unless" you're automating trading (Using EA/bots to trade) As soon as you go live, your psychological side starts to play and you do not see even close results. Because you're not a robot. It's human nature
I would go the other way. Demo trading is useful unless your psychological inablility kicks in once you trade real money.
  • #11
  • Mar 25, 2016 9:32am Mar 25, 2016 9:32am
"Is demo trading useless?"

ask nissan.
nissan gt academy Nissan USA Official Site: GT Academy turns Gran Turismo 6 virtual gamers into real pro racecar drivers

you cant trade real w/o trading demo
  • #12
  • Mar 25, 2016 9:35am Mar 25, 2016 9:35am
it's useless because the market don't necessarily repeat itself (two identical setups, one may win the other may fail).

So, unless your broker let you withdraw your demo profits, it's just useless.
  • #13
  • Mar 25, 2016 9:37am Mar 25, 2016 9:37am
Quoting tunera
it's useless because the market don't necessarily repeat itself (two identical setups, one may win the other may fail). So, unless your broker let you withdraw your demo profits, it's just useless.
he absolutly know nothing about trading

dont listen some cluless people around.trading is same as life.life dont repeat idientical.but experience is must.demo trading gives you muscle memory to do the right thing in right time.demo trading is being intern.ı cant imagine education w/o intern peroid
many real trader turn to demo trading time to time to test to get back confidence etc etc

many real trader take too risky trades on demo just to test them
  • #14
  • Mar 25, 2016 9:51am Mar 25, 2016 9:51am
My view is that demo trading is not entirely useless but more useless then useful!

My reasons are twofold.
One is that demo trading can lull one into a false sense of security. "Wow, I'm doing so well on demo, I'm going to make a killing when I trade live!". What happens? YOU get killed!
Secondly it's just impossible to replicate your live trading style with your demo style (most people agree with that).

I would advise opening a live micro account and ONLY trading 0.01 lot size until you are consistently profitable over 3 - 6 months. Even if it's only $20 profit or something! Then you can jack up your leverage once you're totally confident trading live.
  • #15
  • Mar 25, 2016 9:59am Mar 25, 2016 9:59am
Its like the difference between a testing lap on the track and a qualification lap. Test lap is a must if you wanna know what is right and wrong with your car, it takes a lot of time to get prepared. But you dont get a pole position with your testing lap. its the actual qualification that gets you place on the grid and during qualification, psychological pressure is very strong, you are much more predisposed to mistakes and bad reactions. Brain is playing its tricks. Even if it is the exact same car, weather, track etc..
  • #16
  • Mar 25, 2016 10:07am Mar 25, 2016 10:07am
Quoting jmtini
My view is that demo trading is not entirely useless but more useless then useful! My reasons are twofold. One is that demo trading can lull one into a false sense of security. "Wow, I'm doing so well on demo, I'm going to make a killing when I trade live!". What happens? YOU get killed! Secondly it's just impossible to replicate your live trading style with your demo style (most people agree with that). I would advise opening a live micro account and ONLY trading 0.01 lot size until you are consistently profitable over...
so the most people fail
  • #17
  • Mar 25, 2016 11:33am Mar 25, 2016 11:33am
Quoting vasily
{quote} he absolutly know nothing about trading dont listen some cluless people around.trading is same as life.life dont repeat idientical.but experience is must.demo trading gives you muscle memory to do the right thing in right time.demo trading is being intern.ı cant imagine education w/o intern peroid many real trader turn to demo trading time to time to test to get back confidence etc etc many real trader take too risky trades on demo just to test them
lol
  • #18
  • Mar 25, 2016 12:48pm Mar 25, 2016 12:48pm
Quoting FrXTang
In the demo you can trade without experimental psychological pressure. You can check the strategy. In the demo, you can learn.

This is 100% true and why 95% of traders fail. You will notice that your demo account will usually be more profitable then your real account because there are ZERO psychology going on. Most people will actually take BIGGER risk on their demo knowing its funny money but are unable to make the smallest trades on a live account due to FEAR of losing money. Trading is 80% psychology, 10% system, and 10% money management. If you talk to a top trader, most of them will talk about the psychology side of their trades, not their numbers. Its one thing to trade on a demo account but its another thing to actually see monetary value change in front of you especial when it starts to go down.

If you are having a hard time trading on a real account even tho you master the demo account then invest your time/energy into TRADING PSYCHOLOGY most importantly ACCEPTING FAILURE/LOSSES.

Here, skip to the front of the line. READ The Disciplined Trader by Mark Douglas. This will accelerate your learning curve to be a profitable trader!
  • #19
  • Edited 6:24pm Mar 25, 2016 1:14pm | Edited 6:24pm
Quoting ucoa
Trading is 80% psychology, 10% system, and 10% money management.
Respectfully disagree. If psychology is 8 times as important as the system, why don't EAs -- which are completely unaffected by psychology -- consistently outperform human traders?

Provided that your br0ker's demo environment is accurate -- i.e. prices, costs and slippage are all the same as on their live platform -- then demo can be useful for testing a strategy objectively, without the results being tainted by emotional decision making. However, I tend to use microlots (10 cents per pip) for testing purposes, because demo and microlots are all the same to me. If I'm up or down $20 at the end of the week, that's less than the cost of lunch at McDonalds. I find that emotions start creeping into my decision making at around $3 to $5 per pip. Obviously the threshold is going to differ for each individual.

With some traders, it's possibly more complicated than that. For example, to whatever extent a trader suffers from a dislike of being wrong, then psychology will also affect his demo trading.

Nonetheless, many psychological issues can be remedied easily enough, merely by using a little common sense. For example, if you're exiting too early for fear of losing, simply set a TP or trailing stop (or use an EA, if your exit strategy is more complex), and go out for a walk. There's no need to micromanage exits unless your strategy involves nuanced decision making based on incoming price (or economic) data.

I've read the late Mark Douglas' Trading in the Zone. It does a very good job of explaining how belief systems affect trading, and the nature of an 'edge', but embracing the book's content doesn't remove the necessity of also having a profitable strategy (entries + exits). It is left to each trader to find his own methodological edge. Discipline and self-belief are very important, for sure, but they can't be maintained indefinitely if the trader is losing. A winning mindset is ultimately the product of knowledge and experience. IMO.
  • #20
  • Edited 8:54am Mar 26, 2016 8:42am | Edited 8:54am
Quoting hanover
{quote} If psychology is 8 times as important as the system, why don't EAs -- which are completely unaffected by psychology -- consistently outperform human traders?
Go to the stats sites, and see the top systems. most of them are automated. i just did a quick search, out of the 10 best performing, i saw only 3 manual and 7 automated or semi-automated. That tips the scale in favor of automated trading. I have no way to know if those stats are true, but that is what i saw.

Quoting hanover
{quote}Provided that your br0ker's demo environment is accurate -- i.e. prices, costs and slippage are all the same as on their live platform -- then demo can be useful for testing a strategy objectively, without the results being tainted by emotional decision making. However, I tend to use microlots (10 cents per pip) for testing purposes, because demo and microlots are all the same to me. If I'm up or down $20 at the end of the week, that's less than the cost of lunch at McDonalds. I find that emotions start creeping into my decision making at...
Yes, imo its different for each individual. For a very big trader, testing live with the smallest lots is probably not much different psychologically than demo testing. I guess small size live testing is better , so that you can know if the live server is going well, it is often different from the demo. In live trading -problems begin at the size that create gains which become important for your life and losses that are really painful to accept. It is good that you know your treshold
And just to add- if a trader gets really good at what he does, there shouldn't be any big difference between performance on demo and any size live account. That is given the fact that you become so responsible that you make the same thought proccess on every trade, because of the trade itself, and not because of its size. But that is close to impossible. Greed and fear are absent in demo, but they play the role at live trading.
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