Demo Account Trading Expectations

One of the things I constantly see repeated across the Internet is how we should double or triple a demo account before we start trading. For example, in Kathy Lien’s book on Everyday Millionaire traders, we find this little gem:

One of the things I constantly see repeated across the Internet is how we should double or triple a demo account before we start trading. For example, in Kathy Lien’s book on Everyday Millionaire traders, we find this little gem:

“Triple Your Demo Twice Before Trading for Real

This insight from Hoosain Harneker is perhaps the most practical piece of advice from any of our super star traders. Nobody can master a professional skill right away. Doctors practice on cadavers, lawyers spend countless hours in moot court, and mechanics toil for months in classroom garages. Practice does not guarantee success but lack of practice almost always ensures failure. In foreign exchange, which is Hoosain’s market of choice, every dealer offers a practice platform allowing traders to experiment with virtual money rather than real capital. In other financial markets plenty of software tools exist to allow the trader to “paper” trade in realistic market environments. For example, our other interviewee, Paul Willitte, who was already a successful equity trader, spent three months paper trading his account when he decided to make a switch to electronic stock index futures.”

Ohhh please. If you are capable of tripling your demo account twice, then either:

You are a trading god
You are using way too much leverage for your own good
You have been demo trading for a very long time
Given that your average currency trading hedge fund run by professional traders only makes 10% per year (using no more than 2:1 or 4:1 leverage), it would take you 19 years to do it if your return is equivalent to a professional hedge fund. I doubt most beginners are that patient (hell – retail based forex trading hasn’t even been around 19 years). Unless the beginner is a trading god (unlikely), then the beginner must have used a large amount of leverage to achieve this outcome. It really makes you wonder if anyone seriously ever achieves this feat doesn’t it, because the advice about learning to trade is usually coupled with “don’t use high leverage” …

Macrotactics is a blog devoted to recording a part time trader’s journey into the world of trading currencies. In my day job I work as a manager in an Information Technology company. I live in sunny Queensland, Australia with my wife, a cat and a baby on the way. I have been banging my head on this trading thing for at least 3 years now and the deeper I dig into the topic of trading, the more I realise there is to learn. Trading for me has

... More