Trading Strategy: The Necessary Lie of The Trading Simulator

trading simulation

Before trading in real life and playing with your money in the market, it would be advisable to trade in simulation mode for a while. Of course, you’re advised to approach the world of investments with all possible caution, and it seems that nothing sounds more cautious than trading at zero risk.

So, is it necessary to go through a previous stage of simulated trading before jumping into the real thing? Yes of course. Do not pay too much attention to anyone who tells you otherwise. But be very careful, because you must always be well aware that trading without real money is far from the hard reality of trading real money. I remember a commenter comparing it to playing the video game Call of Duty vs being in an actual war!

Regardless, you must spend at least a  season trading in simulation with a demo account that will give you access to multiple brokers and give you the ability to understand the platform(s) you are going to use to when you’re ready to jump into real trading.

You can not face a real trade without having an absolute mastery of the platform with which you enter your orders. You must master it almost instinctively, like when learns to change the gears of the car without even thinking about what he is doing.

Being able to master and exploit all the resources that your trading platform provides will be a key success factor when you start trading with real money. You have to know how to move between different time charts, be able to handle moving averages at convenience, enter a limited purchase order with its associated stop loss, or undo your market position immediately if there is a “black swan”.

Until you have a feeling of absolute control over the platform with which you will trade in real life, do not even think of putting at risk one dollar of your account. Read manuals, test everything you can think of and squeeze the platform to its limits.

Another very important point is that you will be that you are taking the pulse of the market in which you intend to trade. In the end, the hours of screen time are fundamental to be able to understand your market and the moments that are better for your system. Be very curious. Watch everything you can think of. Test indicators, different chart types and different inputs.

So why dare I say that trading simulators are a lie? Actually, you’re not trading with your real money, and that changes everything. Once you have mastered platform and market controls, you should jump to the real thing as soon as possible. Your feelings and emotions in real life are one of the great barriers to success in trading. The theory says that you must trade in simulation as if you were doing it in real life but it is impossible to practice the feeling of real losses and gains. Especially in your early stages as a trader, you will see that the distance between simulated and real is abysmal at the emotional level.

I always say the same thing to anyone who asks me for advice: I have never learned as much as what I learned in my first week of trading in real life. I could have spent three more months in simulation, I would never have learned as much as everything I learned in those early days. The nerves, the tremors… Of course, it’s something that you had never felt in simulation. Am I wrong?

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