If you shop around long enough for brokerages, especially in the futures space, you’ll come across a trading competition every now and then.

I know something about this because a brokerage that I worked for a few years back used to hold competitions every now and then.

Almost all trading competitions are based on a simulated market using a trading “demo.”

Have you ever day-traded on a demo?

If so, have you ever tried duplicating your demo performance in the live markets?

You’ll find that there’s a disconnect. A BIG disconnect.

Now if you are simulating a “position trade,” one you hold for days (maybe a few hours), then chances are that your demo trade might be closer to a real trade.

But if you trade with high frequency—what most day traders do—you might be in for a big surprise when you finally attempt to translate that into live market performance.

In the live markets, unlike in a demo environment, some of your orders may not even get filled, and many that do may have significantly wider slippage.

If you don’t think this is a big deal, then try it in the live market.

A few minutes of live exposure will show you just how hard it is to day trade markets.

You see, there’s a reason why “demo platforms” were designed to teach you how to “use” the platform.

They weren’t designed to help you “practice the markets,” as so many newbie traders seem to think.

There’s one platform I used to demo that would almost always give me a fill if I simply clicked the bid and ask nearest the market price.

This demo filled these orders so easily that making a profit seemed like an easy thing to do.

But if you tried that in the live markets, chances are that you’d run out of trading capital real fast.

Again, if you disagree, if you don’t think that there’s a disconnect between “demo” and “live,” then just try it yourself.

The main point is that a simulated environment is not the same as a live environment.

So, what then are we to make of these simulated “trading competitions,” particularly day trading competitions?

I’ll leave that up to you to decide.

Another question: what are we to make of trading schools that give webinar demonstrations based on a simulated trading account; an account where there’s no risk to them (though their teaching you how to take risks using their “system”); where order fills and profits are made to look “easy”?

It makes you wonder how many of these trading educators make money “teaching” or selling their methods or systems rather than from trading.

Main point: the simulated trading environment is a “fake” environment, obviously.

And trading competition winners win in a “fake” market, unless they can duplicate their performance in a “real” market.

 


The risk of loss in the trading of stocks, options, futures, foreign exchanges, foreign equities, and bonds can be substantial and is not suitable for all investors. Trading on margin or the use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Supporting documentation is available upon request. Trading futures, options on futures, and foreign exchanges involves substantial risk of loss and is not suitable for all investors. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.