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What is a Trading Simulator, Why You Should Use One, and Which One is the Best?

A trading simulator is an artificial trading account best used for learning how to trade, testing strategies, and honing skills. It’s a simulated market environment that offers all the benefits of learning and gaining experience without any of the downside risks.

As a new trader, there’s no reason to use a real money account during the learning phase. Because in all likelihood, you’ll lose all or a large portion of that money. This is where all new traders should start, but unfortunately they don’t – and pay the price for it.

What is a Trading Simulator - Before You Risk Real Money

It’s quite ironic actually – most prospective traders scoff at the price of trading simulators, learning programs, and everything else that supports their initial training and development as traders. But then they’ll blindly throw thousands of dollars at meme stocks.

Only once the market teaches them multiple hard lessons that are quite financially and emotionally taxing do they finally realize how important legitimate training is. I know because I was once one of these people – not with meme stocks necessarily, but alert services.

At the start, you think legitimate mentorship programs and accompanying tools are so expensive – you want everything to be free or reduced cost. But then have no problem gambling thousands of dollars away trading erratically. It doesn’t make any sense.

But if you’re serious about long-term success and respect your money, then practicing in a trading simulator is an absolute must.

How to Get the Most Possible Value Out of a Trading Simulator/Demo Account:

Some people act like trading simulators are pointless because they can’t replace the feeling of having real money on the line. But even if the feeling isn’t exactly the same, there’s still a ton of value in using one. Here’s a couple tips for getting the most out of simulators:

1. Start Your Trading Journey By Using One in Order to Reduce Financial Risk

Far too many individuals skip the training and practice phases required in order to become competent traders, and as a result they tend to lose quite a bit of money by jumping the gun. And it’s not usually just a few hundred dollars – it’s a few thousand or more.

Beginners tend to have this gravitational pull to the markets – an urge to dive right in without any experience whatsoever. There’s a desire to make money fast combined with a fear of missing out on opportunities – the perfect recipe for impulsive trading.

How Much Money Do Day Traders and Swing Traders Make

What ultimately ends up happening is disastrous on both a psychological and financial level – you end up blowing up your account. This is how most new traders start off. I know firsthand – I personally destroyed several $2,000+ accounts when I first started.

But this type of experience, which is all too prevalent amongst new traders, can be completely avoided with a simulator. Those painful lessons are completely unnecessary. I would’ve been much better off allocating the money I lost toward legitimate training.

The bottom line is that even if I had gotten lucky in the beginning and actually made money, I eventually would’ve lost it all due to bad habits, an improper mindset, and a complete lack of technical trading skills. There’s no point in diving in unprepared.

2. Treat it the Same Way You Would Treat a Real Money Trading Account

One of the most important factors in getting the most out of a trading simulator is taking it seriously. If you treat it like a video game, then you won’t get any benefits out of it. You have to respect your risk and money management rules as if it were real.

If you start with a $100,000 simulated account, for example, don’t just put it all into one position and hope for a 100% return just because you think it would be cool to double your account on one trade. No professional-level trader would ever do something like this.

What is a Statistical Edge in Trading - Expected Value Explained

This kind of approach is just gambling. You can destroy your account in one trade – which should never be the case. Good trading by individuals who experience long-lasting success understand that managing risk is more important than big profits.

The real difference between successful and unsuccessful traders is consistency. If you can follow your risk management rules and generate consistent weekly, monthly, and yearly profits, then you’re executing on a strong edge in the markets. It’s not luck; it’s skill.

One of the biggest mistakes that the vast majority of active traders make is failing to treat trading like the skill-based, peak-performance endeavor that it is. Can people get lucky sometimes? Sure. But over the long-term it’s the skilled traders who win out.

My Personal Favorite Trading Simulator and Replay Platform – TradingSim:

There are tons of trading simulators and demo accounts available out there, but my personal favorite is TradingSim for a number of reasons. For starters, you don’t have to open a brokerage account or download any software in order to use it.

There are many free trading simulators out there, but they typically: 1) don’t provide live market data, or 2) require you to open up a brokerage account. I consider these the hidden costs of free simulators, so make sure to keep these in mind as you shop around.

Personally, I’d rather pay $25 per month for live market data and not be forced to open a brokerage account. But if you already have a brokerage account that provides demo trading with live market data, then you can certainly choose to use that.

Another major benefit of TradingSim is that it contains up to two years worth of historical data, which allows you to go back in time and replay those trading days. So it’s possible to get tons of experience and repetitions in within relatively short periods of time.

You essentially have full control over your experience. The platform allows you to choose your account balance, create watch lists, view price charts, overlay indicators, and track open positions. You can also change the speed and pause/fast-forward as needed.

TradingSim is a platform I wish I used in the beginning of my trading career, but still use now to develop and refine strategies.

Trading Simulators Provide You With Close to 100% of the Experience With 0% of the Risk:

The most important role that a trading simulator can play is protecting your financial and mental capital. As a new trader, you have to accept that you have no idea what you’re doing – and a trading simulator can provide a safe environment for learning without risk.

But in order to get the most value out of using a simulator, you need to behave as if you have real money at stake. Taking wild bets and acting recklessly won’t help you prepare for the real deal. This is an extremely critical practice and development phase.

What is Training For Trading - Best Day Trader Training

Another important component is to keep detailed records of your trades so that you can understand what types of setups and strategies work best for you – and then refine over time. This is a highly underrated aspect of a professional trader’s process.

Only once consistency has been shown in a simulator over the course of many trades (at least 200, in my opinion) should you even consider transitioning to real money. But the key is to start small and slowly increase size as your trading statistics permit.

Overall, starting with a trading simulator can help you avoid the finically-damaging lessons most new traders experience.

Learn More in the Trading Success Framework Course

Written by Matt Thomas (@MattThomasTP)

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Matt Thomas

Founder of, Creator of the Trading Success Framework Course & Trading Paradigm Skool Community, and Intraday Futures Trader Using Auction Market Theory & Profiling (Volume & Market Profile).

One Comment

  • Daniel Tshiyole says:

    This is absolutely amazing, especially for people who are looking into trading but do not know a thing about it. I will try out this demo for myself. Who knows, maybe I will like it and it can be another source of income. I will also share it with people who are looking into trading 

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