Friday, April 19, 2019

The Truth About Day Trading Simulators

Learning how to be a consistently profitable day trader requires practice as much as it does fundamental knowledge. You must be able to apply the knowledge that you are receiving from the courses that you are taking.  A day trading simulator might not mimic all the pressures and risks that come with having real money on the line, but they are very valuable for learning and honing your trading skills and strategies if used correctly.

A day trading simulator is a tool.  Nothing more, nothing less.  And as such, if you use it incorrectly, like any other tool, it can lead to catastrophic results.  So, playing games and having challenges during the learning process is definitely a misuse of this tool and can lead to a prospective trader never reaching the levels that they seek.

*  Using a day trading simulator is a way to develop confidence in your trading decisions and trade without fearing mistakes. Simulators often have real-time or slightly delayed market data, so you can monitor market conditions, and explore different charting tools and indicators.
*  You can also familiarize yourself with trading software and the steps involved in entering, reviewing and executing your trades before working with real capital, and practice using stop-loss orders and limit orders as part of your risk-management strategy.
*  Most brokers offer different types of software called trading platforms. These are actually simulators because all they do is simulate the price action and conditions in the market real time by interpreting the data and providing it in an easy to read format.
*  Using the demo time to explore how each platform functions will give you the chance to see which one of them best suits your trading style.

How should you not use the simulator:
*  You should not play games in it.  Serious trading is not a game.  What happens is that the parameters of the game will never match reality.
*  It will cause you to develop actions and behaviors detrimental to you as a trader.
*  Even though it is a real time market simulator, the execution conditions are not the same so the fills will not be the same as a live account.

How you should use the simulator:
*  Learn how to use and execute on your platform of choice
*  Practice the strategies that you are learning
*  You must simulate your personal conditions.
     -Account size
     -Stocks that you can actually trade with your account size
     -Position size
     -Risk management
     -Build Your confidence in your trading strategies and in your execution of them

So, to sum it all up, stock market simulators provide a safe, structured environment where prospective traders can lean and develop trading skills without risking any money. With time and practice using the simulators, the transition to actual trading in a live brokerage account can become seamless. Just remember, once you leave the simulated world and start trading with your money, mistakes can be costly and a premium is put on your risk management skills.