Demo Accounts are "Rigged" against us all!
But not by any of the brokers.....
They are rigged by OUR OWN MINDS
Let me explain.....
You start learning how to trade, all the lingo, and even some strategy.
You start a demo account, doesn't matter where, and just start trading
You do it just like you learned, from where ever you learned it. Indicators, check, do the analysis, check, major levels, check, and so on.
You place the first trade, with stop and take profit. It wins.
You do it again, and again. Maybe lose here or there, but for the most part you keep winning. You look at the balance finally, and wow, it's up an insane amount. Maybe it was luck, reset and do it again.
You don't pay much attention to the profit or loss of each trade, and even further you may not even pay attention to floating profit and loss (unrealized gain or loss). Money is not important, it's just a demo and you are only trying to test and make sure you know what you're doing, and you won't be trading 100k, it's just practice.
You just missed something that is critical.....
"Money is not important"
It's fake who cares, the strategy and just getting familiar with trading is all you are trying to do. All this fake money doesn't count, it doesn't matter, and you won't watch it at all, or maybe even check after every trade just to feel good about it going higher and higher, but not how much because of trade sizing.
Now you have a lot of confidence, so hey, let's toss $1000 from savings in there and do it for real. You get a spread only account, because that's the starter account.
Account is set up and you don't even bother to see what you can trade with, the margin, none of that. You just do what you did in demo. Everything is set, you apply indicators, what ever you want to do.
"This is going to make me rich" you think, and you place your first trade for 1 lot, because you could place 100 of those in demo, and didn't lose much so it's fine.
Order filled
Immediately, -$23 is all you see. But the trade just opened....
It's now too late, your mind has officially rigged yourself. That instant red number will stick with you.
The price nudges down, only about 4 pips, and you begin to only focus on the floating P&L, The real money you earned, and right now that's $60 in the red, Close it! Close it! Close it! Don't lose it! Whew, got out of that one. Try again
Place another trade, another red $23, now it moves 3 pips against you, oh no, losing again! close it now! ok that's two, but I only have $900 left oh my god, that was fast! This one has to win, because hey, it worked in demo right?
Place another trade.
You know it's red as soon as it opens now, so you wait. Price moves up 4.5 pips, Green, Profit! close it! wow a win finally. Only $35, but a win, going up now.
Place another trade, and because you figure this is when it works like demo, you you think the next one is big. It reverses and takes out the stop loss. You did better but stopped out, lost another big chunk of the account. What's this? price just shot back up and past my target! GGRRRRRRR! It's going to keep on heading up, buy! You don't do the stop loss because it's gone! it has to go, then boom liquidity sweep and it wipes out your account.
But you won in demo, what's wrong!?!?!?! Let's try again.
Repeat the process.
You may do this several times with the same broker, or the different brokers, but you will do the same thing repeatedly. Human nature eventually leads us to believe demo accounts are rigged.
You are 100% correct, but the brokers are not the ones doing it.
When you trade a demo account
YOU DON"T CARE about the money.... It's not real, so why bother, just make sure the strategy works. Check
This is how your mind will "rig" the demo against you.
In demo it's only strategy, testing, trying things out, not the money.
Live account, it's all about the money, because that's what you want out of it of course. And you worked for it, the hard way.
Then, after a few more trades, you see your demo account balance just keep rising again.
Go back to live, Deposit more, and now look harder at the P&L constantly going down, not realizing you tossed the rules out the window again, and you are not trading real the same as when you traded for fake.
The money is real and you don't want to lose.....
This is how demo is rigged.
In order to beat it
You must trade your real account the same as you would a demo account. When you do this, you will notice it won't matter (near as much) which you trade after, you will get the same results.
Demo money is not real, it's a made up unit in a game. If you can manually set the value of your demo, it is best to set it to the same account size as what you intend to trade for real with. This way, you can see the actual P&L, see the real results of backtesting/forward testing, and you can be familiar with the numbers you can expect to see when you use your real money. It is also much less "Traumatic" to our minds as we go to real money from a fake account of the same size, and makes the demo seem more realistic.
If you step down from 100k to 1000 is about the same as going up from trading 1000 to 100k, that's a giant leap in sizing, results, in progress expectations of what it looks like for drawdown and P&L floating, and so on. Just a massive trauma to our mental system. Not having proper and matching expectations is another way our mind will rig the demo against us.
If you find yourself constantly looking at P&L, instead of the trade, it would be good practice to just stay in the demo account until it's boring. The reason you do it to a point of boredom is so you will train yourself to trade by sticking to your strategy and rules as a habit, not just an emotion because the money is real this time.
Once real money gets involved, all the rules "go out the window" even if you don't realize it. It becomes all about the money, and not about repeating the results. Things won't seem the same as they were before, you think. Things are in fact exactly the same as before, minus one key element: The real money.
And that is how you rig the demo accounts against yourself.
Forget about the money in the real account, and just focus on making the trade. Trust your risk management and your math to find the right risk size, set the order and target/stops, and let it rip just like you did in demo. If they don't feel the same, real or live, be careful you are not looking too hard at money, and not hard enough at the actual trade the market is presenting to you and your strategy.
Been there and done that. I agreed with the crowd for a long time, until I did one day demo, one day live, one day demo, one day live, back and forth back and forth, and finally, it hit me, and I got mostly out of it. I still look at money sometimes, but because of journaling and tracking my trades with tradingview, I can see, most of the times I have the right Idea, I just didn't wait long enough. This makes me think back to my demo days, and how the argument around it today is. Yes brokers want your money, but they don't get the money you trade. They are not "hunting your specific stop just because they don't like you" no. They make money by fees on trades you place. That's it.
If they make money on your trade by taking the other side of your trade, that is not a reputable broker, and I only advise reputable brokers to work with, not some new company in the Kaiman isles or something out of jurisdiction of any law, but that's a topic for another time.....
*I've had this argument for the case against how demos are rigged for a long time, just never posted it. Thought here would be a great place to put it, and maybe help some others out of the trap I was in with so many other traders having the same attitude to demo account trading.
Yeah it's definitely rigged. To what degree depends on the mind who is using it at the time.....
They are rigged by OUR OWN MINDS
Let me explain.....
You start learning how to trade, all the lingo, and even some strategy.
You start a demo account, doesn't matter where, and just start trading
You do it just like you learned, from where ever you learned it. Indicators, check, do the analysis, check, major levels, check, and so on.
You place the first trade, with stop and take profit. It wins.
You do it again, and again. Maybe lose here or there, but for the most part you keep winning. You look at the balance finally, and wow, it's up an insane amount. Maybe it was luck, reset and do it again.
You don't pay much attention to the profit or loss of each trade, and even further you may not even pay attention to floating profit and loss (unrealized gain or loss). Money is not important, it's just a demo and you are only trying to test and make sure you know what you're doing, and you won't be trading 100k, it's just practice.
You just missed something that is critical.....
"Money is not important"
It's fake who cares, the strategy and just getting familiar with trading is all you are trying to do. All this fake money doesn't count, it doesn't matter, and you won't watch it at all, or maybe even check after every trade just to feel good about it going higher and higher, but not how much because of trade sizing.
Now you have a lot of confidence, so hey, let's toss $1000 from savings in there and do it for real. You get a spread only account, because that's the starter account.
Account is set up and you don't even bother to see what you can trade with, the margin, none of that. You just do what you did in demo. Everything is set, you apply indicators, what ever you want to do.
"This is going to make me rich" you think, and you place your first trade for 1 lot, because you could place 100 of those in demo, and didn't lose much so it's fine.
Order filled
Immediately, -$23 is all you see. But the trade just opened....
It's now too late, your mind has officially rigged yourself. That instant red number will stick with you.
The price nudges down, only about 4 pips, and you begin to only focus on the floating P&L, The real money you earned, and right now that's $60 in the red, Close it! Close it! Close it! Don't lose it! Whew, got out of that one. Try again
Place another trade, another red $23, now it moves 3 pips against you, oh no, losing again! close it now! ok that's two, but I only have $900 left oh my god, that was fast! This one has to win, because hey, it worked in demo right?
Place another trade.
You know it's red as soon as it opens now, so you wait. Price moves up 4.5 pips, Green, Profit! close it! wow a win finally. Only $35, but a win, going up now.
Place another trade, and because you figure this is when it works like demo, you you think the next one is big. It reverses and takes out the stop loss. You did better but stopped out, lost another big chunk of the account. What's this? price just shot back up and past my target! GGRRRRRRR! It's going to keep on heading up, buy! You don't do the stop loss because it's gone! it has to go, then boom liquidity sweep and it wipes out your account.
But you won in demo, what's wrong!?!?!?! Let's try again.
Repeat the process.
You may do this several times with the same broker, or the different brokers, but you will do the same thing repeatedly. Human nature eventually leads us to believe demo accounts are rigged.
You are 100% correct, but the brokers are not the ones doing it.
When you trade a demo account
YOU DON"T CARE about the money.... It's not real, so why bother, just make sure the strategy works. Check
This is how your mind will "rig" the demo against you.
In demo it's only strategy, testing, trying things out, not the money.
Live account, it's all about the money, because that's what you want out of it of course. And you worked for it, the hard way.
Then, after a few more trades, you see your demo account balance just keep rising again.
Go back to live, Deposit more, and now look harder at the P&L constantly going down, not realizing you tossed the rules out the window again, and you are not trading real the same as when you traded for fake.
The money is real and you don't want to lose.....
This is how demo is rigged.
In order to beat it
You must trade your real account the same as you would a demo account. When you do this, you will notice it won't matter (near as much) which you trade after, you will get the same results.
Demo money is not real, it's a made up unit in a game. If you can manually set the value of your demo, it is best to set it to the same account size as what you intend to trade for real with. This way, you can see the actual P&L, see the real results of backtesting/forward testing, and you can be familiar with the numbers you can expect to see when you use your real money. It is also much less "Traumatic" to our minds as we go to real money from a fake account of the same size, and makes the demo seem more realistic.
If you step down from 100k to 1000 is about the same as going up from trading 1000 to 100k, that's a giant leap in sizing, results, in progress expectations of what it looks like for drawdown and P&L floating, and so on. Just a massive trauma to our mental system. Not having proper and matching expectations is another way our mind will rig the demo against us.
If you find yourself constantly looking at P&L, instead of the trade, it would be good practice to just stay in the demo account until it's boring. The reason you do it to a point of boredom is so you will train yourself to trade by sticking to your strategy and rules as a habit, not just an emotion because the money is real this time.
Once real money gets involved, all the rules "go out the window" even if you don't realize it. It becomes all about the money, and not about repeating the results. Things won't seem the same as they were before, you think. Things are in fact exactly the same as before, minus one key element: The real money.
And that is how you rig the demo accounts against yourself.
Forget about the money in the real account, and just focus on making the trade. Trust your risk management and your math to find the right risk size, set the order and target/stops, and let it rip just like you did in demo. If they don't feel the same, real or live, be careful you are not looking too hard at money, and not hard enough at the actual trade the market is presenting to you and your strategy.
Been there and done that. I agreed with the crowd for a long time, until I did one day demo, one day live, one day demo, one day live, back and forth back and forth, and finally, it hit me, and I got mostly out of it. I still look at money sometimes, but because of journaling and tracking my trades with tradingview, I can see, most of the times I have the right Idea, I just didn't wait long enough. This makes me think back to my demo days, and how the argument around it today is. Yes brokers want your money, but they don't get the money you trade. They are not "hunting your specific stop just because they don't like you" no. They make money by fees on trades you place. That's it.
If they make money on your trade by taking the other side of your trade, that is not a reputable broker, and I only advise reputable brokers to work with, not some new company in the Kaiman isles or something out of jurisdiction of any law, but that's a topic for another time.....
*I've had this argument for the case against how demos are rigged for a long time, just never posted it. Thought here would be a great place to put it, and maybe help some others out of the trap I was in with so many other traders having the same attitude to demo account trading.
Yeah it's definitely rigged. To what degree depends on the mind who is using it at the time.....