Traders are very fortunate to have access to simulators that function identically to the real thing. In almost all trading platforms, you can choose between live or paper trading accounts, and the trading experience will be almost identical between the two.
Typically, the only difference between live and simulator trading is price slippage. For example, in the DAS Trader simulator, you get all the same level 1 and level 2 data streaming into the platform in real-time as if it were the real thing. The only indication you have that you are trading on a simulator account is the account name. Everything else functions the same. However, DAS Trader will not include any price slippage for simulator trades; it will simply provide you with the best bid/ask prices for your trades. For accounts under $200,000, this is not an issue, as they generally will not experience significant slippage. Therefore, for beginner accounts, which are generally smaller, simulator and live trading are essentially identical.
This is a great benefit for traders: experiencing the real thing without risking any capital. Other professions, such as medicine and airline piloting, also utilize simulators, but they are a far cry from the real thing. Traders are fortunate to have these realistic simulators to get them started.
You should plan to spend at least 3-12 months in simulator. The first couple of weeks will be spent just setting up your windows and hotkeys (if you use DAS Trader). Your first month (20 trading days) will essentially be a “throw-away” month, as the trades will essentially be meaningless while you get used to using range orders for trading.
After a few hundred trades, you’ll start to get the hang of it, and the pattern recognition will become second nature. Then it’s just a matter of finding as many trades as possible that fit your playbook without bending the rules too much and sacrificing win rate and profitability.
Once you feel you’ve optimized your first playbook (likely ORB, ABCD, or reversal), then you can consider adding new playbooks to improve trade frequency and profitability.
Each playbook should be initiated in simulator. You should make at least 300 trades (three 100-trade blocks) for each playbook before going live with it. You can use both simulator and live accounts in DAS Trader at the same time, so you can experiment with a new playbook while continuing to trade live with your established playbooks.
Dedication and Resilience
I think you need to find at least 20 hours per week for the first few months to really get the ball rolling with day trading. That time is spent educating yourself about trading and becoming familiar with your trading platform. Once you are making trades every day in simulator, then perhaps you only need 10-15 hours per week at that point. That’s 1-2 hours per day trading, with a few hours per week dedicated to trade review, updating hotkeys, modifying software settings, and other tasks.
Becoming a profitable trader is a bit like trying to hit a home run in baseball. You have to put all your energy into it at once to get the ball over the fence. A million tiny bumps with the bat add up to a lot of effort, but that does not get the ball over the fence. Similarly, a couple hours here and there will not turn you into a profitable trader.
As soon as you finish reading this book, you should read it again. And maybe a third time. Then you should buy a subscription to the DAS Trader simulator, set up the software (see the book website for config files), and start making trades. Then you need to trade every day and log as many trade blocks as possible over the next several months.
This is where resilience comes in. The first few trading blocks are unlikely to be successful. As Ray Dalio, head of the world’s largest hedge fund, said, “You won’t be successful if you can’t tolerate being wrong.” Understanding this now will help you accept that the first several months of trading – or longer – may not go as you planned. That’s normal and shouldn’t discourage you from continuing. It takes time to get used to watching candlestick charts, time & sales, the level 2 order book, and everything else you have at your fingertips while trading.
Going Live
The decision to go live is a personal one, but I believe the best time to switch from simulator to live trading is after scoring three consecutive blocks with win rates exceeding breakeven. You could even consider going live if two were profitable and one was 2-3% under breakeven. As we discussed in the previous chapter, it’s possible to have an extremely profitable system that occasionally loses money during short-term periods of bad luck. The bottom line is that you need to be convinced that the distribution of win rates from your blocks comes from the same distribution as your target win rate.
When you’ve made your first million, don’t forget to properly thank your friends, family, and everyone else[1] who helped you along the way.
[1]I hear high-end Japanese whisky makes a great gift.