The 50k Demo Account

[gamma]

Notice: gamma, we notice you haven't posted on our forums in several weeks, why not take a few moments to ask a question, help provide a solution or just engage in a conversation with another member in any one of our forums?

Well I am more of a lurker than a poster.

But will try to open a discussion on something that I think is fundamentally important and a bit worrying

I notice that a lot if not most spreadbet companies offer a demo account with a massive limit (50,000)
Although this is fine in principle it actually gives a false sense of comfort and confidence to beginners.

I would like to recount a recent experience of mine
A friend of mine asked me to teach him to trade I showed him some of rules and techniques I follow and set him on his way he came back a week later most pleased with himself and could not understand why I am not mega rich as he had managed to take his 50k account balance to 62k.
and wanted open an account immediately and trade.
I asked him to give it another week and trade by my rules.
Instead of trading 10 and 20 pounds a point it had to be 500/point
So his margin was 100 to 1 well before long needless to say his account was liquidated

We all open these demo accounts make huge amounts of money get very confident and full of bravado open live accounts with 5 or 10k and bang we lose it.
Then we start questioning our logic, intelligence,reasoning, join a few boards go on courses spend more money working out what we are doing wrong assuming its always the market not us and we just have not got the right approach or money management or we need a mentor to show us how it is done.
By now its too late you have spent so much money on courses, tutors and seminars you have to recover the money you spent and the downward spiral continues.
If we do not have these masive demo accounts we would be more realistic in our approach and expectations

I have been trading for 10 years now and the first 3 were the same as all losing traders
Only after losing a great deal of money and nearly going nearly mad I have finally made it.

Trading is not astro physics or surgery if it were most of us would not be trading.
The most important thing is patience not to get greedy knowing how to deal with the boredom and discipline.

I hope this post would be useful to beginners and if anyone wants to know more about my trading style please p.m me.
you do not need to pay anyone to teach you to trade there is more information available
freely and better composed than any tutor or course can offer.

Good luck
"The friend"
He is trading now with more realistic expectations.



.

 

[shadowninja]

You're right in a way.

I am not sure however whether increasing the stakes or decreasing the stakes makes for a better trader.

If you put 500/pt and have a couple of lucky runs, you could double your account very quickly, giving you a false sense of security.

If on the other hand you bet just 5/pt and manage to gain 10k in a month, then you must be doing something right. Or are extremely lucky.

 

[0007]

Instead of trading 10 and 20 pounds a point it had to be 500/point
So his margin was 100 to 1 well before long needless to say his account was liquidated..........................................................
If we do not have these masive demo accounts we would be more realistic in our approach and expectations

Gamma,

Good point. Surely it is only sensible to trade a demo account by simulating your future real account ? eg if you have only 2K for real that's what you use in demo - otherwise you will never get any appreciation of risk / money management. Under these conditions 500/pt would not be (sensibly) permissible.

Start small, get big when you know what you're doing.

 

[gamma]

Gamma,

Good point. Surely it is only sensible to trade a demo account by simulating your future real account ? eg if you have only 2K for real that's what you use in demo - otherwise you will never get any appreciation of risk / money management. Under these conditions 500/pt would not be (sensibly) permissible.

Start small, get big when you know what you're doing.

That is the point I am trying to make most new traders use the 50k account as a practice
account then use their real account with very high leverage to mimic the gains on their demo account.

 

[shadowninja]

Oh, I prefer to count the pips. After all, this is what matters in the long run.

 

[gamma]

I agree shadowninja,
I trade by pip count rather than the cash count it also stops you feeling psychologically dissapointed when the market against you

 

[FXSCALPER2]

Oh, I prefer to count the pips. After all, this is what matters in the long run.

Is it? I have heard this before but what matters is how much money you make not how many pips.

 

[wasp]

pips make prizes!

pips, points, ticks or pounds... surely if using the former you can quickly calculate in your head your P:L at any given time...

Personally, I try to remember this is just one in the 1000-odd trades I'll make over the course of the year and they'll be winners, losers, huge moves and pointless little ones but there's no point getting emotional over each one, in the grander scale of things, its just another day at work and individually irrelevant...

Works for me!

 

[shadowninja]

Is it? I have heard this before but what matters is how much money you make not how many pips.

Only if you're thinking short term. I want to be continuing to trade in 10 years time. I need to know now if my system can regularly give me pips. Doesn't matter if I'm trading £10/pt or 50p/pt. If it works, then I can scale up later and buy an island.

If a newbie feels he or she must earn £1000 a week, then there is psychological pressure which can lead to abnormal risk taking, greed and fear take control... which can ultimately blow an account.

 

[Dr_Jones]

Patience fear and greed are the things that mess up alot of people including me.
I see people using demo accounts with 1000000 in them I think its absolutely ridiculous.
Even though demo results aren't the same as live you still have to try and convince yourself its real money from your bank that you cant get back.
It seems you'll only do this once youve traded and lost real money.
Sometimes demo trading they might feel hey this is stupid its not even real money however, if they can consistently make positive returns on pretend money the chances are they could at least make some with real money.
You have to con yourself and tell yourself its real if you lose 2k from a 10k demo you have to try and have the same emotions as if it was real and learn to control them the same.
Astronauts and pilots do this for many years before they get in a real plane or space shuttle and they treat it as real.
Can you imagine if they misjudged the re entry to the earths atmosphere they wouldn't just kill themselves.
Ive known people been trading 20 years and they use demo's from time to time and don't give it a second thought that its real.

 

[wasp]

50k + accounts are perfect learning places for newbies. risk% should equate to the same whether you have a grand or a hundred grand.

If you cannot learn to act sensibly and trade a plan with sensible money management (of any size), you are better of not funding the 'real' account.

If you aren't going to treat it like the real thing, why bother using it. If when you have 10's of thousands, even just on paper and you increase your risk to irresponsible levels, you have no hope in the real world.

 

[gamma]

Interesting views from experienced and no doubt successful traders I would like to hear from novice traders and new traders about their experiences transiting from demo accounts to real accounts.
I will put up my hand first and say it was not a pleasant experience.After trading my demo account for a few months I thought I was invincible, Losing money on my first real account bought me down to earth with a thump and made me eat humble pie.
Inevitably we will all lose initially its all part of the learning process.
Question is how much do need to lose before we learn?

 

[shadowninja]

Interesting views from experienced and no doubt successful traders I would like to hear from novice traders and new traders about their experiences transiting from demo accounts to real accounts.
I will put up my hand first and say it was not a pleasant experience.After trading my demo account for a few months I thought I was invincible, Losing money on my first real account bought me down to earth with a thump and made me eat humble pie.
Inevitably we will all lose initially its all part of the learning process.
Question is how much do need to lose before we learn?

I am on the cusp. The problem I found was that moving from a demo account on one service to a real account on another service had me pulling the trigger later plus dealing with an awkwardly large spread. At the moment, I am back to a demo account and simulating and wide spread by using narrower than preferred stop losses. We'll see if this works soon enough.

 

[bansir]

The 50k demo account size issue has been bugging me too.

I'm risking minute % of the 50k on each trade in an attempt to carry that risk through to a real account where it will be 1-1.5% od said account.

One notion I had was to reduce the £50k demo to £500 so that I was starting with low capital. I thought I might intentionally blow £49,500 to achieve this but knowing my luck, it would go wrong and I'd end up with £100k demo.

Cheers,
Neil

 

[gamma]

Firstly let me say I am not affilated to any company.
but have come across a good SB COMPANY that let you set the demo size down to 3 grand.
and the spreads are just incredible 1 point on the majors.should be good for testing setups.
Just to emphise that I have no connection with this company I will just say its a swiss company
(I hope I am not breaking any rules here. As I understand the site we r here to help each other )
Moderators please delete anything if it is not appropriate.

 

[Aston1st]

Reference DEMO accounts !

You can be the best Marksman on the Range, but in the battlefield it's how you handle everyone firing back at you that counts!

 

[gamma]

In the currency markets its not everyone's firing back at you that you have to worry about but your own bullets ricocheting and killing you.You are too small for anyone to bother about!

 

[shadowninja]

I think you're both right.

What you're both saying is that discipline and money management are important. A lack of both will kill an account very quickly. It is the person within who is the trader's greatest enemy.

 

[gamma]

I concur 100% with that shadowninja