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Demo Accounts: An Indicator of Investing Skills?

Demo accounts are advertised all over the internet, and people who surf financial sites are often exposed to many advertisements that try to entice them to open a demo account. Demo account trading could be considered a more modern form of paper trading. The old-fashioned paper trade involved writing down entries and exits to see…

Demo accounts are advertised all over the internet, and people who surf financial sites are often exposed to many advertisements that try to entice them to open a demo account. Demo account trading could be considered a more modern form of paper trading. The old-fashioned paper trade involved writing down entries and exits to see how a methodology played out in the market.

Key Takeaways

  • Demo accounts can provide some benefit to new traders because they allow the trader to become familiar with trading software and get a sense of how the market works.
  • However, traders should be prepared that simulated results rarely correlate to actual trading results.
  • Traders must be aware that execution, capital, and emotions can be different when trading real money (as opposed to fake money in a simulation).
  • Traders can make demos more realistic by excluding orders that are unlikely to have been filled in the real market, factoring in slippage, keeping the demo account capital similar to the amount that will actually be traded, and making demo losses and profits real by incorporating external stimulus.

Demo accounts allow the trader to do this on a computerized simulator. The simulated trading environment does provide a trader with the opportunity to get used to the software they will be using with their broker to trade the markets. However, when a person moves to live trading after the demo account, there are several changes they should anticipate.

How Is Demo Trading Different Than Live Trading?

Many traders trade profitably in a demo account, but when they move to live trading with their own money, a succession of losses may occur one after the other. Why does this happen?

Demo Accounts Provide Better Execution Than Live Trading. 

Demo accounts will normally fill a market order at the price showing on the screen. When an order is placed in the live market, it is subject to slippage. Therefore, it is quite common for market orders to not be filled at the price expected—or in the case of large orders, for at least a portion of the position to be acquired at a different price than is expected.

Demo accounts will also generally give early fills when bidding or offering. Bids and offers in the live market are also subject to a queue. Bidding at the current bid price does not guarantee a fill, as only a few shares or contracts may be filled at that price. In a demo account, it is hard to know which orders would actually have been executed in the live market. This is true of entries and exits, and thus results attained from a demo account are highly subjective at best, and completely inaccurate at worst.

Demo Accounts Often Provide More Capital Than What the Trader Will Actually Be Using for Live Trading

Demo software generally allows the trader to choose the amount of capital they would like to simulate trading with. The amounts vary, but they are often very large (and beyond the actual capital the trader has for trading their own account).

Simulated trading with a greater amount of capital than will actually be realistically traded can provide an unrealistic safety net for a trader. More capital allows for small losses to be more easily recouped—a loss on a smaller account is harder to recoup.

It is important to note that even-share lots—100 shares—in more expensive instruments (which were easy to afford in the high-capital demo account) may be beyond the capacity of the trader in a live account. And the instruments and volume traded in the simulator may not be able to be replicated with real capital. For example, a trader may be able to trade several lots of Alphabet Inc. at $1,000 a share. But unless they have similar capital for live trading, they may be unable to trade those higher-priced instruments at all.

A Demo Account Cannot Simulate the Emotions of Fear and Hope (or Greed) That the Trader Will Experience With Real Money

This is one of the most jarring differences between simulated and live trading. Fear of losing one’s own capital can wreak havoc on a proven trading system and prevent the trader from implementing it properly. Greed (or hoping a losing position will come back to profitability) can have the same effect, keeping the trader in a trade long after it should have been exited.
When real money is on the line—money that can have a potential material impact (or is perceived to have a potential impact)—it is far different from trading a demo account where success or failure has no material impact on the person’s life.

How Can You Make Demo Trading More Realistic?

Demo trading does have some benefits because it gives new traders a general idea of how the market and a company’s software works. So, can you trade a demo account in a certain way to make it more realistic? While a demo account can never offer the same results that would be realized in live trading, there are several things you can do when testing out systems on a demo platform to make the results as realistic as possible.

Make Realistic Assumptions

If a bid or an offer is placed, and you can see that the bid or offer was within one tick or one cent of the low or high of that move, assume that your order was not filled. The demo may show this order was filled, but in the actual market, this may not happen. Remove the profits or losses from these trades from the net profit/loss shown on the simulator—as if the trade never existed. Only assume bids or offers are filled if price trades through the bid or offer by at least a cent more. For thinly traded stocks or low-volume stocks, this buffer should be expanded even more.

Account for Slippage

On market orders, assume at least a one-cent slippage on high volume stocks. Assume larger slippage in lower volume or more volatile stocks.

Trade With Modest Capital

If possible, trade the same amount of capital in the demo account as will be traded in the live market. If the demo does not allow this, trade only a fraction of the demo account capital. Don’t access any funds from the demo capital which would be in excess of live trading funds.

Get Personal

Pretend the money is real as much as possible. Monitor emotions and how trades are affecting you psychologically while those emotions are felt. Since demo capital provides no real loss or profits, the sense of loss or profit needs to be added in by the trader. One method of doing this is to withhold something you enjoy if you fail to follow your trading plan, or give yourself a small reward when the trading plan is followed (regardless of profit or loss).

The Bottom Line

Demo accounts can provide some benefit to new traders because they allow the trader to become familiar with trading software and get a sense of how the market works. The problem is that simulated results rarely correlate to actual trading results.

Therefore, the trader must be aware that execution, capital, and emotions can be different when trading real money (as opposed to fake money). However, traders can make demos more realistic by excluding profits/losses on orders that are unlikely to have been filled in the real market, factoring in slippage, keeping the demo account capital in line with what will actually be traded, and making demo losses and profits (and thus emotions) real by incorporating external stimulus.

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Statements about Cryptocurrency

Statements about Cryptocurrency

Cryptocurrencies are in a bubble and regulators could burst this at a whim.

  • Eight years after the introduction of Bitcoin, there are now over 900 cryptocurrencies and their prices are at all-time highs.
  • Richard Schiller categorizes bubbles as an underlying story driving the market forward, as opposed to the fundamentals of the assets. Cryptocurrencies are riding on a narrative of economic empowerment and freedom.
  • Despite the widespread attention that cryptocurrency receive, many of the actors involved in the market are not fully informed. Debate tends to turn to hype and naive investors are buying crypto-assets without fully understanding what they are.
  • Banks spend 73% of the market capitalization of Bitcoin each year on regulatory compliance. Crypto-assets are currently unregulated and free of these restrictions. As such, the market has thrived but also developed some bad habits.
  • Regulators cannot necessarily shut down cryptocurrencies, but they can restrict liquidity into them from fiat currencies and hamper their growth. The global derivatives market, for example, is worth $1.2 quadrillion, dwarfing Bitcoin’s $100 billion market cap.

Statements about Cryptocurrency

Market manipulations in crypto markets are undermining their credibility.

  • Due to low liquidity, no regulation, and a lack of clear understanding of the markets, pump and dumps are widespread in crypto markets. This is where a speculator can artificially sell while concurrently buying their own currency, wait for the market to rise, and then dump their holdings.
  • Frontrunning is also a common occurrence in ICOs, where early investors—who are used to show initial faith in the enterprise—buy discounted tokens before immediately selling them on.

As with historic bubbles, scams are exploiting naive investors.

ICOs can have the characteristics of vaporware. Entrepreneurs are raising hundred of millions of dollars purely on concepts. Money is being raised from investors who do not truly understand the technical concepts being proposed to them, let alone whether they are feasible.

  • The actual asset structures of ICOs are not only complex but also new forms of assets in their own right. This further confuses investors, which is compounded by the “FOMO” mentality of rushing into investments and following the crowd.
  • The use of celebrities to promote ICOs further demonstrates the use of manipulative marketing techniques used to cajole immature investors into participating in ICOs.
  • The current ICO craze is reminiscent of the South Sea Bubble of the 18th century, a speculatory period that involved crazed investment into enterprises in the New World. Once one of the highest valued companies of all time, the South Sea Company’s bubble burst and the company disappeared almost as quickly as it appeared.

Blockchains are still not proven technology, and more work is required.

  • Blockchains are still new concepts and their technology has not yet been proven on a consumer-wide scale. Attention should be focused on developing this, not speculating on short-termist projects.
  • The security of blockchains is a concept that most investors in crypto-assets do not understand. The onus is on them to protect their assets, which, on the basis of the amount of thefts and frauds in the space, is not being done properly.

There are some solutions to these issues.

  • A less polarized mentality of “us against the world” is needed; this could be enforced by the promotion of self-regulatory standards. These could also help to highlight the bad actors in the ecosystem.
  • More development is required into the underlying technology of blockchains. In the long run, this would be far more valuable than ICO moon-shot projects.
  • Awareness and discussion needs to be promoted. Conferences should present balanced debates from both sides of the crypto-view and more emphasis should be placed on educating investors instead of soliciting their investments.

Originally Published here at https://www.toptal.com

Statements about Cryptocurrency

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CMStrader Signals provider, the number 1 signal provider 4 years in a row

CMStrader Signals provider, the number 1 signal provider 4 years in a row.

CMStrader, the number 1 signal provider 4 years in a row, is now offering free signals to new clients!  Reliable trading tools are fundamental part of successful trading.

cmstrader for the Best Trading Signals

cmstrader for the Best Trading Signals

 

CMStrader’s signals success rate is estimated in 91% this should be enough to take a look and decide for yourself. since this is their biggest feature and drives this broker towards success, it is opretty afe to say that they do their utmost to provide you with quality forex signals.

This broker also entered the cryptocurrency market and offers several cryptocurrencies.  in short they act on the market and engage their clients directly.

when you start trading at CMSTrader, you can choose from a extended list of currencies, indices, commodities, gold and oil.

CMStrader Signals for better Trading

CMSTrader sends trading signals to traders’ accounts when there is an opportunity to buy or sell orders at specific points; an overview of the speculated price or loss ratio is included.

CMStrader Signals the number 1 signal provider among brokers

CMStrader Signals the number 1 signal provider among brokers

The signals are sent directly via SMS to a cellphone for major currencies traded on the stock exchange, foreign goods and precious metals.

In addition, signals can be sent to an e-mail address and or traders can be notified directly over the phone.  This service is available 24/5.

Like with Most proper signal services don’t expect 50 signals a day as simply there are not that many. you will get maybe a few good ones a day on which you could and most of the time should act.

Earn profits with CMStrader Signals in the forex market – the biggest trading scene in the world. Enjoy our unique benefits, trading education, minimum margin and best leverage! Start with a demo account and enter the amazing world of forex with CMStrader.

More about CMStrader Signals & Forex Broker

  • Name :CMSTrader
  • Website :cmstrader.com
  • Established :2013
  • Regulation :FSP
  • Country :United Kingdom
  • U.S. Clients Allowed ?  :No

CMSTrader is a leading investment advisor specializing in personal wealth management and growth and is a somewhat a newcomer to the Forex market.

they started in 2013 and since then have won several awards 2 including one for having best customer service in 2013.

CMSTrader “CMStrader Signals” is authorized under the name of CMS Ventures Limited which is a New Zealand Registered Financial Service Provider (FSP).

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Supreme Court Sides With Bits of Gold in Bank Dispute

Supreme Court Sides With Bitcoin Broker “Bits of Gold” in Israeli Bank Dispute

Upon appeal, the Israeli Supreme Court has rejected the closure of Bits of Gold’s banking facilities at Leumi bank, Tel Aviv.

The Israeli cryptocurrency brokerage’s appeal followed a previous ruling against it that has now been set aside by the higher court.

As Israel and many other countries struggle with the accelerated phenomenon of virtual currencies, Leumi Bank recently made the news for being a particularly blunt in its rejection of Bitcoin.

We should of course not be surprised with the banks attitude towards bitcoin or any other cryptocurrency for that matter. keep in mind that the banks become more and more obsolete because of them. Bits of gold versus leumi

They will keep on loosing money which now they make with ridiculous commissions of work that is fully automated. so they will try to see how they are able to make the operation and acquiring cryptos  as hard as possible knowing that they will never be able to stop them.

There is widespread anticipation that the upcoming G20 Summit in March 2018 will produce a global, moderate framework for a regulatory approach. Set against that are persistent hostile stances the world over from banks, asset managers and even governments towards cryptocurrencies.

Now that the countries understand there is money to be made with Taxation in cryptocurrencies they might want to make sure that the banks stay within their lane. 

Apart from the Israeli revenue service opting to tax cryptocurrency assets as “properties” and other more positive developments dating back to mid-2017, Israel remains a strange mix of genteel acceptance alongside wildly opposing voices.

There is thus Hope But no decision

Bits of Gold has fought a David and Goliath battle since their banker decided it wanted to steer clear of all cryptocurrency-related business.

On record as recently telling another bitcoin-related trader that they simply don’t want the business, Leumi Bank’s hard-line stance is accumulating bad press. The second-largest bank in Israel appears as discriminatory when analyzing virtual currency traders and other digital coin businesses.

During 2017, a customer made a bank transfer to the Kraken exchange site for buying bitcoin worth $1000. The bank identified the request, halted it, and started investigating.

The elated CEO of Bits of Gold, Youval Rouach said that “The court’s decision enables us to focus on the growth of the Israeli cryptocurrency community.”

 

The February 26 Supreme Court ruling granted Bits of Gold a temporary injunction against their account closure pending further scrutiny by the bank and other parties. The presiding bench declared that the company had “acted transparently and did not violate any provision of law.”

Calling the bank’s concerns “speculative” and turning an unsympathetic ear to the plaintiff, the ruling does, however, allow for the bank to still close the account on any small technical detail that defies legislation. As a record of a public spat around cryptocurrency’s right to be recognized in many ways, the ruling is seen as a victory for the local cryptocurrency community.

One Small Step Forward

Although not as absolute as nations like China that has opted for draconian bans, Israel is a front line for digital coins’ right not just to exist, but also become assets in the true sense of the word. The Supreme Court noted in its written ruling that Bits of Gold had not made itself guilty of the violation of any standing laws since opening its doors for business.

 

The Bits of Gold v. Leumi Bank case might become something of a test case once the bank applies its mind in scrutinizing the company’s accounts against the backdrop of existing legislation. The outcome will also be informed by sentiment post the G20 Summit due in March as well as other global regulatory trends.

Now that the countries understand there is money to be made with Taxation in cryptocurrencies they might want to make sure that the banks stay within their lane.

This was First Published by coindesk

 

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