How Do You Use the Simulator?
Do you trade on a simulator? If so, what do you use it for?
- Are you practicing learning a trading platform?
- Are you perfecting strategies and testing them?
- Are you going wild to see how much $ you can make in this “safe” environment?
I got to thinking about my use of the simulator these last few weeks. In the past, I have fallen into number 3 above–going wild–on the simulator. I realize now, I was only training myself for failure. Let me tell you why. . .
When I learned to trade, we were taught to use real money. The simulator was just for learning the platform and maybe testing a strategy. (But, even the platform and strategies were learned using real money.) The message was, just trade really small share sizes until you “get it.”
Now, this same school teaches students to use the simulator first. Thank God. They teach students to simulated their trading for several months through “stage 2” of a 8 stage progression. (Each stage requires having a certain level of competence before moving to the next stage.) This way to start trading make so much more sense to me. I wish I had learned this method when I was trained.
So, fast forward to now. I am back on the simulator as I progress through stages 1 and 2, on my way to trading live again, when I reach “stage 3″. I have no issue with this. I have lost enough trading live money, that I am happy now to show competence first!
Reflections on Simulating
Now, I am reflecting on using the simulator. Up until recently, I didn’t give it much thought. The simulator for me was more of a game. I suspect that is why we were taught not to use it. Because if you don’t have real money in the game, you don’t take is seriously, right?
Most of us take simulated trades we would never take with live money. It is challenging to trade simulated trades the same way we trade live money. Haven’t you traded thousands or millions of dollars, doubled down, been crazy with your simulator trades, just to see how much money you could make? I sure have. I remember one student in my class making $60k-100k “playing” on the simulator. . . I think it is a mistake.
The simulator is not a game, even as much fun as it can be to play with. I think it should be taken with utter seriousness and only be used as though it is live money. This may seem harsh to some, and like a no-brainer to others. For me, it wasn’t a consideration. I was trading live money even when I was losing money on the simulator. No one taught me differently, and I didn’t figure it out on my own.
From now on, I will make sure to be profitable on the simulator before I trade live. If my live trading starts to go South, I will go back again to the simulator for “training.”
Practice Makes Perfect
I suspect that what we practice on the sim is training us. Period. So, if you practice being carless, it can carry over to your live trades. As much as you can, try to believe it is real money you are trading. Practice until you have profitable days consistently. Train your mind and subconscious not only how to make money, but also to be comfortable making money. It prepares you for the real thing.
The Upper Limit
We all have an “upper limit” tolerance level for “good” in our lives. Beyond this limit, we may not be able to tolerate any more good coming to us. This might sound counterintuitive. “Of course I want more good, more $, etc.” you might say. But that isn’t how the subconscious works. There is a level beyond which we are not used to, or are comfortable with, more good.
When we hit our upper limit, our behavior changes and we “correct” for the situation. Things have become too good and need to be brought back into our comfort range. We sabotage ourselves, almost like a resistance level acts as a ceiling for a stock’s price upward. Price reaches the resistance levels and retreats. . .
How to Expand Your Upper Limit
The good news is your upper limit level can be expanded. That is the goal of practicing, of visualizing (I will do a blog on this soon), of journaling, etc. These tools let you grow your comfort zone. (See the book, The Big Leap, for a great read on the subject of The Upper Limit.)
So, I invite you to practice expanding your upper limit using the simulator.
My client “Bill” had traded successfully for years. However, he “played small.” Although he had been profitable, had winning strategies, and had great self-discipline, he hadn’t let himself trade more than 100-200 shares per trade. If you are in a similar situation, try expanding your comfort zone. Use the simulator first for practice. Let yourself assimilate growth slowly as you expand share size, stop size, how far you let your winners run, or wherever you are playing small.
I advised “Bill” to try trading 300-400 shares in the simulator. To treat it like real money as much as he could. He was to notice discomfort or other feelings or thoughts that came up when trading the larger share size. Pretty soon, he was able to “stretch” his comfort zone with increased share size and try it live.
This is a great use for the simulator. Just make sure you keep it “pristine.” If you goof around using it, and you go for those big wins, your brain gets trained that way.
What is your experience with the simulator?. . . let’s hear your comments.
Wishing you enlightened trading.