Success with demo account - what about a Live?

Trading Systems
1

Forgive me if I throw too much out here…

I’ve been practicing on a demo account for about a month (maybe that’s still too little time to tell) and managed to reach my goals.

I’ve set myself a goal to make a 4% of my total investment each day (or 10-12 pips at 100:1 margin), five days a week. Considering that, I’ve increased 20% each week, having doubled my money, and ultimately my goal is to double my money each month for the next 12 months with a live account.

While things are peachy with the demo account, surely it is not this easy with a live account? How could I practice doing this factoring in potential slippage or delays in fills? My end goal is around $1.6 million; when I get to the upper amounts, surely there are even more risks?

What major differences are there in the demo vs live accounts? (I use MetaTrader 4 for a demo) How could I improve my preparation in the demo to carry my plans out in the live account?

Should I continue like this, what is the best broker to use given my goals and my use of MetaTrader?

Thank you for your responses.

2

All brokers claim that the demo vs live relationship in terms of prices/spreads is VERY close if not the same. I have yet to go Live so I can’t comment on whether this is true.

In my own opinion however I beleive the differences are psychological. Knowing that YOUR REAL MONEY is now on the line with every trade could make you anxious (makes me anxious thinking about it). With a demo, no matter what it is desensitized. Losing that $20 in fake money is reconciled by our mind saying 'meh well I could have done this, we’ll see next time". On a Live account I can see myself losing sight of the loss being a learning experience, thus clouding my other trades and possibly moving away from my system.

Just my 2cents.

3

How much did you demo with and how much are you going start with for real?

4

For the demo, I started with $5,000 and ended the month with around $10,000, at 100:1 margin. I will be starting a mini or micro with $1,000, would like it also to be around 100:1, no more risky than that. I know that’s quite a difference in dollar amount, but on the demo, the goal is the same, to double it each month.

5

That’s not bad then…some start out with a 50K demo or more and do well so the impression is that it’s easy but when they start with 1K, it fails. Perhaps demo it again starting with $1k and double that a few times just to make sure. :slight_smile:

6

Thanks, that is encouraging. Word of note, the demo starts a minimum of $5,000 (otherwise I would only do $1,000). As to the psychological, I’m doing my best to treat the demo as real money.

My concern is, because my goal is over $1 million, when I get to the upper amounts (as in doubling), what problems will be presented? Judging by forums and other research, I’ve read of slippage and potential failure to order a fill.

7

I’d say worry about that (big lots) when you get there…lol. Probably the biggest problem will continue to be psychological in nature…one(s) you didn’t knew existed or feel will be a problem. Sorry that’s not so encouraging, but chances are high. If you can get that under control, you could do fine. Remember, baby steps :slight_smile:

8

I’ve been trading large demo accounts with a lot of success as well. I’m on about month 7 right now. I have been decreasing my position sizes to avoid getting wiped out in a significant down turn. So far so good. The question of course is does success in a demo account translate to success in a live account?

I liken it to flying a flight simulator in an F-16 or some other highly agile aircraft. Certainly one can learn the mechanics in a simulator. Also crashing does not get you killed:rolleyes:

I am absolutely certain that the biggest difference between a live and demo, aside from the fact that it is real money we are talking about, is the pyschological aspect. I plan to start with a 10K live account because I feel that it is better preparation psychologically for trading much larger accounts than a small micro account. But that just me.

I would add a word of caution. It may be that your goal of 4% per day is too agressive. You are probably using too much leverage and you will likely find yourself getting a margin call that will really hurt the bottom line.

Good luck!

9

Am I the only one here who is not so blase about demo money ? I suspect one of my trading problems at the moment is that I do get bothered about loosing demo trades. I am conscious that making progress will mean that I can write off bad trades with nary a thought. That said I do wonder if those who claim to be so cool about hitting a SL are either very good at what they do , very foolish or just telling porkies :slight_smile:

That said this week has I hope taught me something about the cool about loss school of hard knocks.

Mon/Tuesday well up and very happy. Tues/Wed knocked back and disappointed. Friday back up again - 10% up on my demo account at the start of the week. Proof yet again that a gain is a composite of win & losses.

10

Not sure where you got the impression that the rest of us here were blase about demo trades… It’s an invaluable way to gain experience.

11

i had traded with demo account. i start with 5000k, then i make it 5k became 50k, so i decided to go live, but again i fail, then i open demo account with 5k, and i setup a goal 100,000k

the diff acount live and demo is psychology, spread is no big deal

12

yrs ago i opened a demo and everything went great, made 10k in no time. i thought this stuff is a piece of cake. opened a live acct with 2k and never seen 1 pip of profit, didnt matter where i placed my sl it would shoot down there and go straight back up, not once did that happen with the demo.

was watching bloomberg channel on tv one day and they were talking about the usd/yen and showing a graph so i turned on computer and compared with the graph i had, totally different:confused: i was using cms at the time(i think) and called them . they said they use their own numbers:eek:

that explained a whole lot to me. these jerks can do anything they want with their graphs. i didnt put any more money on there and a few weeks later i signed back on to find my balance was lower than what i left it so i called them again and they said it was maint. fees. WTF!!!

guess it pays to read the fine print. :slight_smile: anyhow, now im trying a demo at fxcm, we will see how it goes there. not looking to get rich but would like to profit at least $500 or so a month. is that possible?

13

I’ll put on a cliche and say that “anything is possible”. The key to reaching that however is the proper money management that is every so talked about when it comes to trading. As easily as you can have one successful trade, you could have 2 or 3 losing ones. Managing the drawdown is key.

14

Just my 0.02…

First, you HAVE to understand that when trading spot/cash FX you are trading in the wild wild west. It is unregulated and you have got to do some homework on the broker you choose.

MANY brokers out there will give horrible fills, flush stops…and worse. Seemingly profitable positions can vaporize when the broker insists the order was not filled or received. Pick a reputable broker, do a lot of research and read reviews.

Sorry but trading a paper account is good for a couple of things but not much more:

First, it allows you to get acquainted with the platform and understand how to place orders etc.

Next, it somewhat proves your “system” and can give an indication as to whether you are onto something or not. You should stick with it for several months and be ruthless in recording wins and losses.

Do not assume that you can repeat the performance seen in a paper account with real money. There are a couple of reasons but the biggest as prior posters have indicated is the psychology of it all.

A good trader is not excited when they have a great trade OR fearful/depressed when stopped out. Trading is best done in an emotionless state. Plan your trade, exit and stop BEFORE you enter it. Once you are in the trade remember that plan and stick to it. Don’t move your stop, don’t second guess yourself. If you get stopped out carry out a post mortem to see whether it was a good trade or a bad entry.

Being stopped out is NOT always indicative of a bad trade. You have to accept losses as well as winners. A good entry can result in a profit or being stopped out. If your system works you need to take each entry provided. If you try to cherry pick them you remove any chance of statistical analysis as to whether the system does in fact work. NONE of us can work out at the point of entry whether this trade is a winner or a loser, otherwise we would be billionaires in short order.

If you want to read up on the psychological aspects of trading try a book (Trading for a Living by Dr. Alexander Elder). There is a lot of material in there about reacting like the rest of the sheep like we are all programmed to do.

Another reason that paper trades differ from real trades is obvious, you are not being ‘filled’ with anything so have no impact on available bids/offers.

There is a reason that 90% of traders that open a $10k account close/lose it in 6 months. The playing field is heavily sloped against you. Nothing in life is easy. Forex trading is no exception to the rule. It requires a lot of work and discipline to come out ahead of the field.

Use good money management. Ensure EVERY trade you enter has a decent risk:reward. Track every trade and KNOW what your win/loss ratio and average risk reward ratios are. Without having these in order you will slowly but surely bleed capital.

If people tell you you are likely to turn $1,000 into a seven figure account balance in 12 months they are doing you a disservice. It can obviously be done, insofar as it is technically possible. The odds against it are huge but if I were you I would aim at something more realistic. If you turned $1,000 into $50,000 in a year you will have done incredibly well, in fact amazingly well. Personally I think $10,000 is a possible target if you have discipline and a good system.

Good luck!
Padraig

15

What do you put that down too? Why can you paper trade, but not the real thing? Human emotions that flare up when there is real money on the line perhaps?

16

I was going great guns on demo after 3 months and decided to go live.Put 2 thousand in the account my win pct was ok but my demon was cutting my winners short and letting my losers run.Padriag is right on with his thread and i think keeping detailed records is key for working the analyictical part of the brain.Keeping records help stave off a massacre on my account.I stopped with about a 17 percent loss in my account.

The emotional part is like night and day from demo.When trades turn against you for any length of time the emotional part will try and take over getting you out of a trade earlier or hanging on to a loser longer.The frontal lobe is only trying to keep your hopes up and make you feel better about yourself but thats not what were here for!!! The method that you use and the facts that they are based on must withstand the slippage the brokers and are human errors.

For me personally iam ready for another swing with longer time frames to cuttout the noise of the market and no manual trading all trades on limit orders with stoploss.(this is knew to me)I gave myself a ultimatium maintain over 50 percent hit rate(already acomplished)with a positive roi within 50 trades and no more than a 40 percent drawdown on capital.I wish you good luck on your knew endeavor!

18

i’ve done the same thing, 5 grand into 10 on a 30 day demo account, the draw down doesn’t affect you as much on a demo account, whereas with a live account the draw down battered my head which made me chase the trade and ultimatly losing.
on one trade in demo i was $1,300 down, i looked at the charts and was confident the peak was nearly reached and stayed in the trade which closed out + $950 up but i could never do a similar thing on a live account.

to me the whole mind set is clear to see if you’ve tried playing online poker, playing for real or playing for fun money are two entirely different things, the game is the same but way its played are poles apart

19

In his book ‘The Psychology of Trading’, Brett Steenbarger found that making position sizes so small that that they were insignificant in themselves, he was able to over come the problem that you describe and become profitable.

Try trading with very small lot sizes. Once you are comfortable with that, you can begin adding to them.

20

Because people have not modified their behaviour and emotional responses to certain signals that [B][U]require[/U][/B] a modification if you want to trade successful with real money over [U]any length of time[/U]. Especially with big sums of money.

[I][B]The most important signal that requires a modification in response thereof…there are others…[U]is to know when to get out[/U].[/B][/I]

Anyone who can’t modify his/her behaviour and emotional response to above signal will never trade successfully.

21

You get better fills with a Demo account. I entered the same trade in Demo and with Real Money. I got filled right away with the demo while the real money did not. This is a craft that you need to learn; “Assume every trade will against you from the start” Now can you tolerate the loss, if not then trade smallers. I’ve stopped doing Demo accounts because of the inflated EGO I get . Trade small learn the craft you can always trade bigger.