Hi guys, how does simulated trading differ from real trading ? I have read answers saying it is about the thinking process. However is there any other technical differ between these 2 ? For example, in real one, your stop order could be processed by an trading algo, but in sim that does not happen is that correct ? Is there other similar technical stuff that differ between sim and real trade - please let me know what they are ? Thank you
The obvious difference is with real trading, your money is at risk! You could lose part or all of your monies! Simulated trading is make believe trading. So, you have $100,000 in make believe monies and you can lose that. Doesn't matter because you lost nothing! No monies at risk! There is no emotions involved when you are placing simulated trades so, you can think more clearly. When real money is involved, people get emotional as nobody wants to lose monies! The natural inclination is to hang on and hope the stock goes back up and you recover your losses! Correct decision would be to cut your losses and keep it as small as possible. You cannot win each and every trade! If you hang on to your losing position in real trading, chances are good, you will sustain even larger losses! No difference to the setups you use as well as the entries and exits. Why should there be any difference? Your trading setups and methodology would be the same!
This has been asked a number of times. My answer is always the same. Without fear and greed, you have no idea how you will react and make decisions with real money. As for execution prices, you can only simulated good paper trading logic if the trade size is small and you trade only on the open and close. Otherwise, you have too many assumptions to make.
The only value of sim is to highlight that which doesn't work. When you find an approach that appears to work in sim, try it out with small, real $$$.... see how your gut and brain hold up. Adjust from there.
Remove Fear and Greed and trading is EASY, with different story!! Trade Demo to learn a method, then trade small amounts live to practice then increase as you go.
This seems to be the meat of your question. "How would your executions work in real when compared to sim?" I can tell you that in liquid futures with small orders, you may be surprised to find that real works even more accurately than in sim. Remember, a sim engine can only simulate what the exchange will do. I have seen countless examples in my own sim testing that when, for example, you have a limit order in sim, the target may fill immediately, or it may fill a few seconds later, after the opposing side has reached your order. However, it does not, and cannot, take into account all the other variables, as Old Man Morse mentioned above. In my live trading, I have seen, overall, better fills in the live account. For what that is worth. And many of the trading platforms have options to account for these variables that you can adjust to try to get "as close to the real" as possible, such as split fills, bad tick-data filtering, and a whole host of other problems. I would strongly suggest that if you wish to compare the performance between your sim engine and the live side, do it in MGC with 1 contract on both the sim and live account simultaneously. Consider it a "cost of doing business". Or...Learning your broker/data-feed response times, etc. Whatever you wish to call it. It is cheep, easy, and low risk. Give it a shot, and consider it a "training cost". If on the other hand you mean the psychology side of it? Well, that is something that is addressed in the psychology section of the forum. It is gross. But the technicals are easy.
Let’s set fear and greed aside (huge item but let’s play along). Next it depends on market And size. Stock no way to properly simulate. CME futures sim trading will be almost identical to real on ES futures for example. Good luck.