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Is demo trading useless?

  • #21
  • Mar 26, 2016 12:29pm Mar 26, 2016 12:29pm
Half useless. In demo, you can trade without fear. Youre a best, fearless mercenary who hunt and kill for money. You learn strategies, tactics, entry point, basic etc, etc. But once youre in the real game, you get slaughter. They trap you in psychology game. You see a good setup, take a trade, get stop out, you see another entry point, you feel anger, put another order with bigger lot size, but your stop got hit by the spread widening or sudden spike, then another entry point but by that time youre too afraid to put another order and the market move in your favor by 600pips and continue the trend for one week straight. You get frustrated and enter on the trend but the trend just ended and youre trapped in wedges leaving no exit unless you cut your losses. But you didnt, the market move away from your order by far and wide and youre in massive drawdown, hoping the price will return, you averaging down and guess what. You got margin call.
In short, unless you can trade without emotion with sound trading plan with well calculated risk, youre good. But if you have sound trading plan with well calculated risk but with emotional pressure, i dont think you can be that discipline and persistent.
  • #22
  • Mar 26, 2016 1:31pm Mar 26, 2016 1:31pm
demo trading is useless. period.
  • #23
  • Edited 3:03pm Mar 26, 2016 2:48pm | Edited 3:03pm
Quoting feline207
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.
Fair enough, but assuming we're talking retail trading systems, I find that a little surprising. Automated systems are restricted in the analysis that they can perform, and are less intelligent and adaptable than human traders.

I've yet to see a forum-shared EA that's been consistently profitable for 5+ years. But then I wouldn't expect anyone to share their golden goose publicly.

Over the years, some of the highest vouched FF members have approached me privately, asking to have their systems automated. I've coded more than 20 EAs, to their specifications, spending several weeks on some them, trying several different variations to make them profitable. The process gave me some hands-on insight as to exactly how aspects of nuanced analysis get reduced to a mathematical approximation. To the best of my knowledge, none of these EAs are being run profitably today, and I admit that's made me somewhat skeptical. Also the fact that all of the profitable traders that I know personally prefer to trade manually. Many institutions are still happy to pay the salaries of economists, analysts and traders, although admittedly they operate to a somewhat different agenda.
  • #24
  • Mar 26, 2016 3:12pm Mar 26, 2016 3:12pm
Quoting hanover
{quote} ... Automated systems are restricted in the analysis that they can perform, and are less intelligent and adaptable than human traders.
Quoting hanover
{quote} ... To the best of my knowledge, none of these are being run profitably today. I admit that's made me somewhat skeptical about EAs. And the fact that all of the profitable traders that I know personally prefer to trade manually.
it is a very good post, Hanover, very good indeed.

Each of the sentenses marked are the lines that represent transformations of my thoughts about trading with EAs. Each of these sentenses are the stages the trader should go through to understand what in orded to make EA profitable all the time this EA should take into consideration human behaviour, not only a bunch of the trading system rules - that is the problem, in other words the EA should be adaptive to the market conditions, to the market driven by human beings. Can this be done easily, using, say, the MT4 programing capabilities? I should answer, no, it is rather impossible. However can it be done in principle? Yes, it can be done, there should be used nontrivial methods such as genetic algorythms, for example, but in the conditions of short term trades.

Best
D.P.
Hunting High and Low
  • #25
  • Mar 27, 2016 5:23am Mar 27, 2016 5:23am
Quoting hanover
{quote} Fair enough, but assuming we're talking retail trading systems, I find that a little surprising. Automated systems are restricted in the analysis that they can perform, and are less intelligent and adaptable than human traders. I've yet to see a forum-shared EA that's been consistently profitable for 5+ years. But then I wouldn't expect anyone to share their golden goose publicly. Over the years, some of the highest vouched FF members have approached me privately, asking to have their systems automated. I've coded more than 20 EAs, to their...
I am not using eas so probably not the best advisor on that topic. I think that automated systems ( in the form that they exist in the retail world of trading ) are very simplistic and rigid. In 99% of cases - they probably are not based on a sound theoretical base. And in the few cases when the creator really knew the stuff, the creation was made very imperfect. Also , my opinion is - the system, automated or not, can never beat its creator. All origins start in our human brain. In HFT, the holes being exploited are mostly on a very very short time scale - seconds and miliseconds, and mortal humans just cannot exceute that fast, and it is not necessary because we can code ( well, some of us ). But again, all the strategies are developed by humans. And on long timeframe, there probably isn't any real need to automate. It just puts additional risk and cost and complication. I mean- if i make few trades per month or week, why would i automate that and give my money to a program that relies on lines of written code. I would be in front of the screen, depending on my very own decision. Because our mind is more flexible than the most advanced computer ( still). I would automate only if the necessary time interval between entry-decision and actual execution or exit decision and execution is typically so small that I cannot react on it reasonably, and I doubt such case is present in retail Most people here are doing some form of analysis and then come up to the actual decision through a long thought chain, there are also lots of things to look after when already in a running trade.
I guess that some sort of semi-automation could be beneficial. I have heard that people are using that in combination with manual trading. I am not.

I think i have to summarize my scattered thoughts - imo automation should aim to make trading easier, but not to transfer trading decisions responsibility from human to computer. The responsibility is always ours. What we can think up is what we get.
  • #26
  • Mar 27, 2016 7:02am Mar 27, 2016 7:02am
Quoting feline207
{quote} I am not using eas so probably not the best advisor on that topic. I think that automated systems ( in the form that they exist in the retail world of trading ) are very simplistic and rigid. In 99% of cases - they probably are not based on a sound theoretical base. And in the few cases when the creator really knew the stuff, the creation was made very imperfect. Also , my opinion is - the system, automated or not, can never beat its creator. All origins start in our human brain. In HFT, the holes being exploited are mostly on a very very...


Automated trading without any input i.e. "set and forget" is as far as I know impossible. There have been a few bots which are set to operate during the Asian session when volitility is supposed to be lower however because the market (as we all know) is NOT a level playing field, they end up losing big time.

Semi-automated, is on the other hand, a different proposition. If one knows exactly how/when/why your EA operates and one sets it up in the correct/optimum market condition, the EA can deliver very nicely. I have one which I use occasionally in just that scenario and it's great. In fact I would recommend this type of trading to those just starting out or newbies. It cuts out a lot of stress which is the killer no doubt about it.

In fact I have 2 different semi-automated bots, one works good on higher time frames and the other on 1 min or 5 min chart.
  • #27
  • Mar 27, 2016 7:45am Mar 27, 2016 7:45am
Quoting jmtini
{quote} Automated trading without any input i.e. "set and forget" is as far as I know impossible. There have been a few bots which are set to operate during the Asian session when volitility is supposed to be lower however because the market (as we all know) is NOT a level playing field, they end up losing big time. Semi-automated, is on the other hand, a different proposition. If one knows exactly how/when/why your EA operates and one sets it up in the correct/optimum market condition, the EA can deliver very nicely. I have one which I use occasionally...
so called 'newbies' have absolutely no chance of profiting, especially with a bot. I have suffered a lot because of bad advice on forums.
  • #28
  • Mar 27, 2016 8:18am Mar 27, 2016 8:18am
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 3 - 6 months. Even if it's...
This is a sound advice. I agree since I went the same way. What most people forget is that demo account will never teach you how to conquer your fear of losing.
Live life king size !
  • #29
  • Mar 27, 2016 9:51am Mar 27, 2016 9:51am
Quoting feline207
{quote} so called 'newbies' have absolutely no chance of profiting, especially with a bot. I have suffered a lot because of bad advice on forums.

Surely you don't you don't listen to any of the advice you get on these forums - you're courting disaster!
  • #30
  • Mar 27, 2016 9:57pm Mar 27, 2016 9:57pm
Actually, demo is a good sandbox. It teaches you how to work with your terminal but not with trading.
  • #31
  • Mar 28, 2016 1:15pm Mar 28, 2016 1:15pm
Demo is the one of the greatest things in fx trading.
  • #32
  • Edited 3:31pm Mar 28, 2016 3:12pm | Edited 3:31pm
@Dr.Phoenix, feline207, jmtini: Thanks for your replies. From what I've seen, the manual trader has some big advantages over EAs. He can use fundamental analysis; assess visual price patterns; evaluate the 'quality' of abstracts like S/R; assess sentiment-based response to news; perform contextual, intermarket, correlation, and multiple TF analysis; adapt the strategy to changing market conditions; and perform many other nuanced forms of analysis. All of these discretionary items range from complex to impossible to code as math-based rules that are suitable for an EA. Consequently, most of the EAs that I've seen use indicators, grids, and/or some kind of P/L based MM, i.e. concepts that are more easily coded. Hence, largely out of expedience, most retail EAs operate using a very different set of premises to those used by a 'typical' discretionary trader. Given the restrictions inherent in coding, the trader/programmer is to some extent forced to impose his own toolset on the market, rather than letting the market determine which are the optimal mode(s) of analysis to use.
  • #33
  • Mar 28, 2016 4:02pm Mar 28, 2016 4:02pm
Quoting hanover
Given the restrictions inherent in coding, the trader/programmer is to some extent forced to impose his own toolset on the market, rather than letting the market determine which are the optimal mode(s) of analysis to use.
Great statement!......
Markets are not efficient, rather they are effective - Jones
  • #34
  • Mar 29, 2016 8:54am Mar 29, 2016 8:54am
Useless! better learning with microlots.
  • #35
  • Mar 31, 2016 4:51am Mar 31, 2016 4:51am
I think it depends of the personallity. For me it works, because i learn some patterns in demo which are profitable in the right direction. When one pattern is recognized, one position with the highest possible leverage is open in demo.
(psychological point for me- i hate to lose even virtual- they are also accumulated by a lot of small win trades and high leverage can wipe out all)
In same time one position is opened in real account with smaller percentage of pips, 1-5m candle after confirmation with bigger leverage equal to 33% of my whole capital in margin and target 6.50% return- not more or less.
After the real position is closed, the demo one is left open until reverse of the wave/trend, just for analysing and statistics- time, news, volatility, volume and max pips per pattern possible in these conditions.
Also i am still learning a lot of systems, compare them, search all similar ideas between them and test all this in my precious demos.
So, no- the demo trading is not useless.
  • #36
  • Mar 31, 2016 5:11am Mar 31, 2016 5:11am
Demo it's the thing which will always have arguments for and against, cause there are too many complaints on difference in pips on demo and real, firstly, demo gives you a chance to think that you have enough skills, but then it turns out that you lose again and again
  • #37
  • Mar 31, 2016 5:47am Mar 31, 2016 5:47am
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
Totally agree
  • #38
  • Mar 31, 2016 8:31am Mar 31, 2016 8:31am
Demo trading is indispensible. I use demo trading when:

  1. I test new systems obviously

But also when I switch brokers. This is something I don't read about much but my personal view is that you should demo with any broker you don't have experience with. I don't trade with brokers that don't offer a demo.

Demo with an account size and lot sizes similar to what you plan to trade live. If you're going to be trading with only $1.000 it's better to go with the $2.000 demo than the $50.000 demo.

Honestly unless you have a huge account with no spreads but commission you shouldn't be trading extremely low timeframes (M1 and M5). The spread will just yank a ton of cash out of your account.

One final point: If you use custom templates or indicators on your demo MT4, make sure they are IDENTICAL on your live one. When I make a new strategy I literally copy and paste the indicators from the demo terminal into the live terminal.

Again that's just my two cents, feel free to respectfully disagree. As always foreign exchange markets are risky. I'm not responsible for any losses you incur. Blah blah blah. Etc.

Edit (3/31/16 9:32 EST):
I just noticed that people are talking about the psychology of demo vs real. While this is true, if you have a strong attachment to the money in your live account that would impact your psche, I would HIGHLY suggest withdrawing the money and waiting until you have enough capital to trade without attachment. Don't trade money you can't afford to lose.


--- Jacques

Holy grail: risk management
  • #39
  • Mar 31, 2016 9:22pm Mar 31, 2016 9:22pm
a demo account is very important for traders because the demo account will allow us to practice the skills of good trading. Using a demo account will allow us to maximize capital well. For that, we have to use a demo account with either
  • #40
  • Apr 1, 2016 12:37am Apr 1, 2016 12:37am
For me Demo trading is useless as it doesn't involve real money is trading under such scenario doesn't tells you how you are going to react if its real account with real money. Trade with Real money even on cent account will give you better results than trading in demo. Even if you lose your small real account 10 times, still you experience some knowledge about your mindset. That definitely gives confidence to trade in real market condition. Telling this from my own experience.

Demo trading is useful to test a strategy 1st time for 1-2 weeks. Not after that.
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