How to Sim Trade For Success

Some traders think sim or simulated trading is good while others will tell you that sim trading is useless or even develops bad habits. Our feeling is that sim trading is great, fantastic-- awesome! Well, let us take that back: great sim trading is great. Most traders don't benefit from sim trading because they don't practice and engage in great sim trading. It's like anything else: if you practice sim trading like the 99% then you're going to get results like the 99%. Playing is not sim trading. But, even playing can help you learn about order types and your platform.

So, the question isn't whether or not sim trading works: the question is how do you make sim trading work for you. How do you sim trade for success? 

  1. You should use the exact same account size you will go live with. It doesn't do any good to practice trading a large account if you can only go live with a small account. 
  2. You should use the exact same discipline and daily risk. This is not a right or wrong answer. But, if in your sim trading you're willing to take big swings and only stop out at a moderate sized loss then you must be willing to do the same in the live account. Traders becoming risk averse when they move from sim to live is the primary cause of losses. If you know you can't handle those swings in reality then you will have to practice with tighter stops.
  3. You have to actually win. If you're losing in your sim trading then of course you will lose when you go live. You need to develop some consistency with winning.
  4. You have to listen and identify and be able to recognize and cut out your problem trades. This takes some time, as well. 
  5. Your sim trading needs to be long enough to instill actual confidence and resolve. Would you have confidence in a trader who had sim traded for only a week? The exact amount of time you need is open to debate but up to 3 months is reasonable.
  6. You don't want to sim trade for too long without live feedback. No matter how serious you take it when you go live you still start to notice things about yourself and your methods that you might have missed. It is better to try to get some risk on. If you're good you might start to regret the amount of money you could have made.
  7. You can also sim trade methods you normally wouldn't be confident in trading, learn new things, try new markets, etc. If you're really committed sim trading multiple accounts at the same time can provide critical insights.
  8. Because markets are constantly changing sim trading is no guarantee for success. All experience based methods including backtesting, live trading, and yes again sim trading suffer from the uncertainty inherent in change.

 

Wednesday, September 02, 2015 4:21:00 AM

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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure:

Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.