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On demo trading and trading contests

There’s a post on one of the BabyPips blogs today about how you can take demo trading more seriously so it’s a better developmental experience. There are three suggestions included:

  1. Feel the pain
  2. Treat it like an exam
  3. Join a forex trading contest

I have no idea how the exam thing is supposed to work since successful trading is a continuous process, not a discreet experience. Grading yourself in the different aspects of your trading (risk management, sticking to your plan, etc.) is certainly something you should be doing periodically, but the exam metaphor doesn’t work for me in this case.

As for the first and third alternative, they both have the same issue. How do you feel the pain when you have nothing at risk. As I noted following my academic conference trip a couple weeks back, you need the experience to be salient. Demo trading is good for learning mechanics and testing things, but cannot properly provide the same emotional/intellectual experience as live trading. That’s why I’ve so often said you need to trade real money, not paper money and totally agree with the Abnormal Returns sentiment on the subject.

As for trading contests, I’ve never been a big fan. They focus on the wrong things. On a related note, CNBC was forced to temporarily shut down its annual competition because of manipulation (see this and this).

By John

Author of The Essentials of Trading

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