Tradovate Futures Trading Blog

What is Simulated Trading and Why Do People Love It?

Posted by Tradovate on February 22, 2017 at 4:39 PM



Simulated futures trading takes place in a risk-free environment using real-time market data to show what is actually occurring in the market and lets traders place trades without sending those orders to the live market at the exchange. In other words, you are trading without using real money. 


Simulated Trading for New Futures Traders


New traders can benefit from simulated trading by learning how to trade futures without putting any capital at risk and practicing trade execution, order placement, and risk management as the market is moving. It also allows for learning how Tradovate’s platform works and how the various trading and analysis tools function. Often, making the switch to live trading is as seamless as switching account numbers.


Traders want to focus on the market and deploying trade strategies when real money is on the line, not testing out a new idea or figuring out how the software works, which makes simulated trading a valuable tool to move up the learning curve.


Simulated Trading for Experienced Futures Traders


It may seem counterintuitive, but experienced traders also get value from trading in simulation. Why bother “paper trading” when you can actually trade in the live market? It’s simple. Markets are dynamic and ever-changing, and traders sometimes need to change with the markets. Testing new ideas and techniques that culminate in the creation of a brand-new strategy or trading a new contract can be done in live trading. However, using simulated trading instead of trading live can save precious capital when the new strategy doesn’t work as expected, or the market action trades differently in a new contract. 


Key Benefits of Simulated Trading for Any Trader


  1. Practice: Many endeavours in life require practice and repetition to make advancements in performance, and futures trading is no different. Learning things like entry timing, stop placement, and position sizing through practice is an important part of the trading journey.
  2. Risk-free: Pilots practice in flight simulators for one main reason: the environment is risk-free, and their safety is never in question. They put their full attention to training, skill development, and getting prepared to handle many types of scenarios and situations without the distraction of what could happen if they were actually in the air. Likewise, traders can remove risk to actual capital from the learning equation by practicing in simulation.
  3. Stress-free: After a few trades that didn’t go their way, some traders like to go to the sideline while they clear their head and reassess what is happening as part of their risk management plan. Instead of totally unplugging from the market, they want to keep their finger directly on the pulse of the action without assuming risk, so they switch to simulated trading as a way to stay in the game while they figure out what to do next, without the emotional effect that live trading can produce


Simulated trading can have natural limitations, like not including the real-world emotions  that gaining profits or incurring losses can produce for a trader, so it is not a complete trading experience or substitute for all that can be learned in live trading. However, it can be an excellent training tool that futures traders of all experience levels can utilize to hone their trading skills.


Tradovate includes unlimited real-time simulated trading in our Active and Advanced membership levels, and you can access simulation directly within the live trading platform simply by switching account numbers.


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