Why simulating trading is different from live trading.

Every trader starts off on a simulator, most do well.  I am not for or against simulating trading, it is important. When smacking up against the reality of real money it is important to retrain yourself from the sim mindset.   It is nice to lob up half court shots all day but it only has a small place in the game of basketball.  Practice like you play. The purpose of a simulator is so you can practice executing, clicking the button. It allows you to test a thesis without risk of losing capital. It also allows you to simulate the flow of money in and out of your account and give you an idea of what it means to you.  But the live account is always different, it is different for the following three reasons:

Not realistic

Your fills are usually better, some sims are better than others but none are realistic.  A tick matters in the market it does not matter on a sim.  The market trading a price and getting filled at that price are very different.   The second problem is you always trade larger, accept more risk than you are actually able or comfortable with.  Risk makes you do crazy things.

Focus in correct place

While sim trading you are focused on the market.  In live trading you are focused on the DOM.  Sim trading does not provide the punch in the gut but it may provide a sense of success.  Very easy to hit the reset button on a sim account.  Hitting the reset button on the live account means wiring in money.  Being able to focus on the market while live trading requires a solid trading plan (rules applied to a strategy) and process.  Until you do that there is so much uncertainty and questions that the mind cannot continually stay focused on the market.


There are no dollars at risk on a sim but more importantly you are not bound by risk.  If you have “unlimited” capital it is easy to make a few thousand bucks.  A few thousand bucks a day is a good living, but not if you are risking 100k to get there.  It is easier to come out of a hole with a sim because you can trader larger, in live trading you should only trade larger from a position of strength.

A simulator is a useful training tool but do not let it fool you.  Simulators make it possible to skip the steps required to have a career in trading because there is only upside (in the mind of the sim trader).  When you add the variable of downside it changes the view, it changes everything.

We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com or twitterstocktwits, and facebookSubscribe to Traderhabits by Email

The services and materials provided should not to be interpreted as investment advice, an endorsement of any security, commodity, future, or personal investment advice, or an offer to buy, sell, hold or trade futures, options or commodity interests or a recommendation to buy, sell, hold or trade futures, options or commodity interests. You assume the entire cost and risk of investing and are solely responsible for any and all gains and losses, financial, emotional, or otherwise, experienced, suffered, or incurred by you.

Read previous post:
Why you need to develop your mental talent.

One part of mental talent is the ability to know yourself. Separating what is happening to you from what is...