Risk-Free Demo Trading: Use Indicators Effectively in Sim Mode

The old term is “paper trading,” but no one actually uses paper to trade anymore. Today, practice trading is known as “demo trading” or “sim trading” (simulation trading). These are risk-free ways to test your trading without risking actual capital.

The Importance of Demo Trading

Demo trading is an essential step anytime you’re learning a new aspect of trading. Beginner traders are encouraged to spend months sim trading, knowing the science without actually risking money. Advanced traders should still sim-trade when exploring a new strategy or when incorporating a new indicator into their current plan.

NinjaTrader makes demo trading simple and easy. You can create a “sim account” and set an initial balance without depositing funds. To create a Sim account:

1. Open the NinjaTrader Control Center
2. Select the “Accounts” tab
3. Right-click and select “new simulation account”
4. Follow the options to set up your account
5. Click “OK” and begin demo trading

You can create multiple sim accounts to practice different strategies, and each can be selected through the Accounts tab. It’s recommended that each sim account has a balance that’s similar to the principal you’ll be trading.

Effectively Using NinjaTrader Demo Trading for Practice

NinjaTrader demo trading can seem like casual fun, but advanced traders approach it seriously. The practice will only be as helpful as you treat it. To effectively test strategies and hone skills through demo trading, you need to:

• Establish Clear Training Goals: Clearly define your reasons for demo training. Are you testing new strategies, learning new indicators, or practicing risk management? This will give direction to your practice. Come up with objective metrics to measure performance, so you can objectively determine when it’s time for real-money trading.
• Treat It Like Real Money: Approach each trade with the discipline and caution you would employ if real money were at stake. The goal is to make real trades eventually, and you’ll only be prepared if you’re disciplined during practice. Be aware that there may be an emotional disconnect between practice and real trading, even if you make a conscious effort to treat a sim account like a real money account.
• Be Honest About Performance: It’s natural to focus on winning trades and dismiss losing ones. This is a habit that every trader must break, though, and you should break it during practice. Be entirely honest with your demo trading performance. Don’t explain away mistakes, fudge performance in your mind, or otherwise give yourself an undeservedly positive review. Be brutally honest — because your portfolio will be when money’s at stake.
• Don’t Rush: Don’t rush the demo trading stage. It’ll take a lot longer to recover losses if you move to real-money trading prematurely, as compared to spending a little more time in the practice stage.

While it’s not quite as important in most cases, don’t forget to account for any fees you’d pay if real-money trading. Per-trade commissions can significantly decrease earnings from trades that show modest gains, and commissions add up if making multiple-day trades. Maintenance and other set fees have a disproportionate impact on small portfolios. 

Learning Indicators in NinjaTrader’s Sim Mode

If you’re using NinjaTrader’s sim mode to practice with indicators, there are a few other specific things to follow:

• Research Indicators: Which indicator you should study will depend on your trading knowledge and style. Research any indicators that you’re curious about until you decide which one you should focus on right now.
• Single Indicator: Limit your practice to just one additional indicator. This will be the sole indicator used if you’re learning a brand new one, or it could be one additional indicator overlaid onto the indicators you already regularly use. Isolating your practice to a single indicator will show precisely how your use of that one indicator is affecting trade performance.
• Control Sim Account: Practicing is part experiment, as you want to see whether the new indicator helps improve trading performance. Open two SIM accounts, and use the second as a control account, so you have a well-designed experiment. Make trades using the new indicator in your first account, and without using it in your second account. Compare performance to see and track any differences.
• Consider Market Conditions: Not all indicators are equally valuable for all market conditions. Keep in mind that a technical strategy using a specific indicator may work well now, but that doesn’t mean it always will. Learning how to interpret multiple indicators will help you adapt when market conditions change.

Once you have a proven track record using indicators in simulation, there’s one more step before actually trading real money using the new indicator. Backtest your strategy to see how it’d perform in different conditions and over time. You can backtest using the NinjaTrader Strategy Analyzer.

Use Advanced NinjaTrader Indicator Tools

If you’re serious about practicing with new indicators so you understand them well, you’ll want to be using advanced indicator tools. Basic tools are helpful when first starting, but have limitations. More advanced indicator tools let you pursue strategies at higher levels.

At Affordable Indicators, we have a range of indicator tools for NinjaTrader. Some of the most popular are our MAs Trend Indicator, ADX Indicator, RSI Indicator, and Stochastics Indicator. These are just a few examples of the many different NinjaTrader indicator tools we offer as standalone NinjaTrader tools or suites of multiple tools.

All of these integrate seamlessly with NinjaTrader and can be used for both real-money and sim trading. Each also goes beyond what basic indicator tools do, yet remains affordable enough for retail traders and individual financial advisors. We stand behind our products, providing lifetime support if you ever need assistance.

Start Demo Trading With a New Indicator

To get started learning a new indicator, download our appropriate NinjaTrader indicator tool today. Set up two SIM accounts, and you’re ready to start practicing. Here’s to advancing your trading skills through demo trading.