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MPS Performance Measurement: Trading Using a Demo Account

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MPS Performance Measurement

In parallel to “on-the-fly” trading activity described in chapter 9, Aman started to do demo-trading. Demo-trading, what is it? Demo-trading is the process of trading by using a demo account. The purpose of this chapter is to present the performances of Money Printing Strategy by using a demo account. As you could guess, IG provides free demo accounts for traders who wish to test their trading skills and to get familiar with the IG trading platform.

The demo accounts put at client’s disposal the same real-time data feed as for the real accounts. The only difference is the type of money. With a real account, you trade with your own real money while with a demo accounts, with a virtual trading capital put at your disposal. Demo accounts are normally for a limited duration. It is an excellent tool to test and exercise the performances of your trading strategy before using real money. From a psychological viewpoint, the stress associated with demo trading is much less intense than with real trading. As regards this exercise, however, I did feel real stress because this was the only opportunity to measure the MPS performances and include the results in the book before publishing. Furthermore, some two weeks' time was allocated make a representative number of trades. Therefore, I had often to use market orders, with the associated level of stress, and violating the Money printing Strategy principles. Apart from that, trading with the demo account by applying the Money Printing Strategy is quite similar to trading with a real account because you will place only limit and stop orders upfront.

How do you open a demo account? You can do it by going to "www.IG.com", and clicking on the "https://www.ig.com en/demo-application" link. From there, you can fill out the compulsory form. Thereafter, you will receive an email containing a link to activate your demo account. Once activated, you can log on to your account by typing the provided Login and Password. Your demo account is then open and ready for trading. At the same time, the IG funds the accounts with a given amount of virtual initial capital in the currency of the country you open the account in. My account was opened with the “IG.com/AU” in Australia, with an initial virtual trading capital of Australian Dollars (AUD) 20,000.

This account was opened on Thursday, September 4, 2014. Figure 10.1 shows a snapshot of the IG demo account on September 24, 2014.

10-1Figure 10.1

Figure 10.1 displays the following information:
  1. On the right side, it shows a watch list of selected financial instruments under the radar, with the real-time data stream.
  2. On the left side, it shows a real-time chart of NASDAQ-100, called the US TECH-100 Cash.
  3. On the lower right part, it shows the list of open positions. It shows one Short position with 2 contracts of TECH-100 (or 200 shares) sold at US$ 4,108.2, with a profit of US$ 11,080.
  4. On the top row, it shows the “Equity,” “Profit/Loss,” and “Margin,” which are all in Australian dollars AUD 41,528, AUD 12,508, and AUD 2,483 respectively.
As already mentioned, the initial virtual capital was AUD 20,000. We know that buying one contract (100 shares) of TECH-100 with own money would require some US$ 410,000. Therefore, I was obliged to use a relatively high level of margin. For buying one contract, the level of margin capital was more than 20, which represents 5 percent of own, and 95 percent of borrowed margin money. With the current open Short position, I chose to Short two contracts, hence taking an even higher margin and a bigger risk. However, the Short trade was placed at the price of a previous multi-year high, hence with a high RRR and therefore, the level of taken risk was justified. Regardless, you should be cautious and refrain from using a high level of margins unless you exactly know what you are doing. This is because the risk of total loss of capital gets exponentially higher as well. Furthermore, this is a clear violation of MPS principles because it drastically increases the risk of emotional trading. The safest way is to use only your own money to trade, at least at the beginning. Once you have a record of successful trading at hand, you may progressively consider using slight levels of margin. Figure 10.2 shows the list of closed trades from the opening of account until September 13, 2014.

10-2Figure 10.2

Figure 10.2 shows the list of eight closed trades. The currently open position is not included. All those trades were made in some five half-day trading sessions, with an average of around three hours each. This represents a total of some 15 hours of trading excluding preparation time.

The IG technical support engineer made the first trade to resolve an internet browser problem. It led to a loss of $23.53. This is the first trade at the bottom of the list. Out of other seven trades, six were gaining and one, losing. The purposely taken loss of US$ 442.35 was due to the high level of margin and therefore, leaving the position open overnight was deemed too risky. The current gaining position is still open and therefore, not included in the list. After the closing of the current open position, this would represent a total of eight valid trades, seven gaining, and one, losing.

During the demo trading, DJ-30 was in a corrective mode of a historically narrow trading range.

Up to September 13, 2014, the accumulated gains were some AUD 9,500 with a total capital of AUD 29,500. At that time, the closed deals represented a gain of 47.5 percent of initial capital without taking into account the additional gains of the open position of another $11,000.

The accrued gains since the opening of the demo account up to and including September 23, 2014, the last day of demo trading, were AUD 22,026.52. The account statement dated September 24, 2014, reports this gain, which represents 110.13 percent of the initial capital.

Due to personal schedule constraints, all trades were made during the period from September 04 to September 13, 2014. The open gains were the result of a limit order which was placed at that time.

For information, the gains are net, after deduction of all brokerage fees and commissions.

The ratio of losing to gaining trades is 12.5 percent or 1 out of 8 losing, against 87.5 percent or 7 out of 8, gaining.

Each gaining trade shows an average profit of AUD 3,083. The single losing trade lost AUD 442. This represents a ratio of average gaining to average losing trades of 6.98 times.

Otherwise, each of the eight demo-trades gained in average AUD 2,698, whether gaining or losing.

The account expiration date being overdue, the demo trading activity was terminated at the end of trading session on September 23, 2014. Since the demo account was expected to be closed without notice after two weeks, it was decided to use the account for the purpose of testing and refining after September 24, 2014. If the account remained further open and the testing exercises produced interesting results, they were to be reported accordingly.

For the sake of full transparency, all trading account statements for the period from September 08 to 23 are included in Appendix 1.

Figures 10.3 and 10.4 together show the demo account statement on September 24, 2014.

10-3Figure 10.3

10-4Figure 10.4

The statement below shows the following information:
  1. The date of statement is 24/09/2014;
  2. The account holder’s name is “Aman Kabir”;
  3. The running profit for the open trades is AUD 13,006.66;
  4. The account total surplus or deficit is AUD 22,026.52. This represents the gains of the account. The initial capital of AUD 20,000 is already subtracted. Therefore, the total account capital is AUD 42,026.52.
For details of statements, please refer to Appendix 1.
As you may guess, the amount of stress felt during demo trading, in parallel to writing this book, was very high. The net results are, however, a gain of 110.13 percent or AUD 22,026.52 of the initial capital of AUD 20,000 in six half-day sessions of trading while Dow Jones was fluctuating in an exceptionally narrow range.

The demo account being surprisingly still open, I decided to do a few more days of trading. The manuscript had to be ready for the first round of review on October 16, 2014. Therefore, the demo account statements include the results until October 15, 2014, after the closing bell.

You will find below a few Snapshots of trading days until then. The associated demo account statements are included in Appendix 1.

DJ-30 finally ended the corrective narrow range to enter a motive impulse mode. Figure 10.5 shows a snapshot of the demo account after the closing bell on October 9, 2014. All positions are meanwhile closed. One limit order with a Maintenance Requirement “Margin” of AUD 6,309 is active, but not visible here. The account shows a total of AUD 160,670 with a gain of AUD 140,670. Thanks to the day’s high volatility and large range, the gains were substantial.

10-5Figure 10.5

Figure 10.6 shows a snapshot of the demo account after the closing bell on Friday, October 10, 2014. Two Short positions of 5 contracts each are open. They are gaining AUD 29,950 and AUD 31,050. Together, the gains of the open positions represent AUD 70,232. Limit orders with a Maintenance Requirement “Margin” of AUD 25,329 are active, but not visible. The account shows now a total of AUD 225,019 with a gain of AUD 205,019.

10-6Figure 10.6

10-7Figure 10.7

Figure 10.7 shows a snapshot of the demo account before the opening bell on Monday, October 13, 2014. It shows that one Long position of 5 contracts is open. What did happen? The two previously opened Short positions were closed because the target close price had been executed. At the same time, a limit order to open Long, 5 contracts, was executed. The open Long position shows neither gains nor losses. Limit orders with a Maintenance Requirement “Margin” of AUD 12,686 are active, but not visible on the chart. The account shows now a total of AUD 245,597, with a gain of AUD 225,597. Figure 10.8 shows a snapshot of the demo account before the opening bell on Wednesday, October 15, 2014.

10-8Figure 10.8

The status shows that all open positions are closed. A limit order with a Maintenance Requirement “Margin” of AUD 12,640 is active and visible. The account shows now a total of AUD 275,118, with a gain of AUD 255,118.

The previous days impressive gains are mainly the result of TECH-100 entering a motive impulse phase.

The last trading session occurred on Wednesday, October 15, 2014. The results were included after the closing bell.

10-9                                                    Figure 10.9
Figure 10.9 shows a snapshot of the demo account after the closing bell on Wednesday, October 15, 2014, and before the opening bell on Thursday, October 16, 2014. It shows one open position. Two limit orders with a total Maintenance Requirement “Margin” of AUD 18,962 are active and visible. They are both Short limit orders, one for 5 and the other for ten contracts. The open prices are visible as well. The number of open contracts is 15, Long, and is currently losing AUD 100,155. The account shows now a capital of AUD 400,880, with a gain of AUD 380,880.

The first round of demo trading activity had to end on October 16, 2014. During the trading period of some five weeks, the initial virtual capital of AUD 20,000 grew to AUD 400,880. This represents a gain of over 1,900 percent or 19 times the initial capital.

The second and last round of demo trading lasted from December 5, 2014, to February 10, 2015. The original demo account in AUD had been closed without notice sometimes in November 2014. Therefore, another demo-account was opened with the IG in The Netherlands. The initial virtual capital was €100,000. This time, this capital grew to €3,101,104 (over three million) in some two months' time. Figure 10.10 shows a snapshot of the status of the account on February 10, 2015.

10-10Figure 10.10

Please refer to Chapter 11 for details of the second round of demo trading. The trading statistics of the first round is listed below.

Demo trading Statistics (First round)

Final capital:                                                                       AUD 400,880

Initial virtual capital:                                                          AUD 20,000

Account Profit/loss:                                                           AUD 380,880 (19.04 times – 1904 %)

Total Gains:                                                                        AUD 677,088.6

Total Losses:                                                                     AUD 182,477

Total Number of trades:                                                    116 closed trades, one invalid.                                                                                                        Total valid trades:                                                             115.

Number of Gaining Trades:                                              80 (69.6 percent)

Number of losing trades:                                                 35 (30.4 percent)

Average gain for gaining trades:                                    AUD 8,464 (677088/80)

Average loss for losing trades:                                      AUD 5,214 (-182477/35)

Average gains per trade (to all trades):                         AUD 5,888 (677088/115)

Average loss per trade (to all trades):                           AUD 1,587 (182477/115)

Number of Long trades:                                                  63 (or 54.8 percent)

Number of Short trades:                                                 53 (or 45.2 percent)

Total Contract:                                                                 483

Total Long Contracts:                                                     180 (37 percent)

Total Short Contracts:                                                     303 (63 percent)

Estimated broker fees:                                                 Minimum US$ 48,300.

Total Paid CFD Interest:                                                  AUD 13,576.8

Demo trading duration: This activity lasted approximately 5 weeks with intermittent breaks; in total, it was some 16 half-day sessions or some 50 hours.

Context of Demo trading (first round)

In order to achieve a statistically representative number of trades in a short period of some two weeks, it was necessary to place market orders in real-time. We know that using market orders inevitably leads to emotional trading and stress, but also to over-trading. Both were true, and many mistakes did occur. The compulsory utilization of high level of margin was an additional cause of stress.

Such high level of stress and fatigue did often lead to many mistakes. The most significant and frequent mistakes took place when ticking of "Force Open" button for Loss-Parking Strategy was omitted by inadvertence. Consequently, over two-thirds (67 percent) of losing trades were the consequence of those mistakes. The intention was actually to use the Loss-Parking Strategy by placing "Force Open" market orders. However, the open losing positions were closed because the "Force Open" button was mistakenly not ticked. By using limit orders, there would have been no mistake because all limit orders open new positions systematically and without closing any open position. The statistics would have therefore shown much better results of some 12 losing trades and much less losing amounts than what is reported. However, it would have then been impossible to make 115 trades or 230 executed orders in an anticipated short period of some two weeks. A choice had to be made.
The demo account statements of significance are included in Appendix 1.
The provided statistics show the real power of Money Printing Strategy. It is like a Money Printing machine. Anyone who masters the strategy should be able to achieve such results autonomously.

Status of Demo trading Account (2nd round)

The original demo account of September 2014 denominated in Australian dollars was closed presumably sometimes in November 2014. After a phone call with the IG, they kindly opened me a new demo account in The Netherlands, with an initial virtual capital of €100,000. Meanwhile, the status of the new account was as follows:
  • 66 trades were made during the period from December 5, 2014, to February 10, 2015.
  • The statistics show 61 gaining and 5 losing trades. However, three of the losing trades were caused again due to omission of ticking the "Force Open" button while placing market orders. By excluding those three losing trades due to “finger trouble,” the statistics would show 64 gaining and only two, losing trades. This represents a rate of 97% gaining and 3% losing trades. The two losing trades were closed on purpose. They represent negligible losses.
  • On February 10, 2015, the demo account shows a total of €3,101,104 (over three million). This represents a gain of €2,901,104 or over 29 times the initial virtual capital of €100,000 after two months of trading. Without the “finger trouble,” which closed three losing trades unintentionally, the gains would have been significantly higher.
  • The overall trading period was some eight weeks. However, little trading occurred during and around the holiday seasons of Christmas and the New Year in 2015.
As you may realize, the performances of the second round of demo trading are much better than the first one. The second round took place in a much less stressful environment for the following reasons:
  1. The initial virtual capital was higher and therefore, the level of needed margin, lower.
  2. A relatively larger period of two months was available for demo trading.
  3. Representative results of the first round being already available for the book, the performance results of the second round were a kind of bonus exercise.
  4. Owing to availability, I could allocate much more time to trading but also to exercising and relaxing.
  5. The time difference with the US markets being only of six hours, there was relatively little need to sacrifice sleeping time for demo trading.
  6. Because of the more relaxed environment, the MPS principles could be applied more thoroughly something that kept usage of market orders to a minimum.
As already said, the ratio of losing to gaining trades was 5 over 66 including the "finger trouble" losing trades, or 7 percent. This means 93 percent of trades were winners. When excluding the 3 "finger trouble" losing trades, this would represent 2 over 66, or 97 percent gaining and only 3 percent, losing trades. This is why I am so confident that you can achieve a ratio of over 90 percent of gaining trades if you master your psychology and apply the MPS correctly.

All account statements are available as proof. Only the account statements of December 8, 2014, the first one and the last one of February 9, 2015, are included in Appendix 1. The reason is to keep the number of pages of this book as low as possible. Figure 11.2 shows a snapshot of the account on February 10, 2015. In particular, it displays the amount of "own capital - Eigen Vermogen," which is €3,101,104.

11-2Figure 11.2

Chapter 17 was added as part of Edition 1 of this book. It presents the results of the demo account until January 15, 2016. You may wish to check it.

Status of Demo trading Account (3rd round)

The first round of trading took place during the period from September to October 2014. It was using an account denominated in Australian Dollar (AUD). The results are reported in Chapter 10.

The second round of demo trading took place from beginning of December 2014 to early February 2015. It was using a demo account in Euro in the Netherlands. The results are reported in Chapter 11. This account is kept open for demo trading as long as possible. It was opened in early December 2014 with an initial trading capital of €100,000. At the end of the second round of demo trading on February 10, 2015, this capital grew to €3,101,104. After February 10, 2015, the account remained open with one open position, but without any trading activity until August 2015. On August 24, 2015, that position was closed with a substantial gain resulting in a total capital of some €6,500,000.

From September 18 to December 31, 2015, I did only a few demo trades due to time constraints. With the closed position on August 24, 16 trades were made. Out of those 16, two were losing and 14, winning. However, the two losing trades were closed unintentionally due again to omission of ticking of the "Force Open" button while placing real-time market orders. With the 66 trades in round 2, and the 16 in round 3, this becomes a total of 82 trades. Out of those 82 trades, 5 plus 2 were losing, and 75 winning. These statistics represent a 15% losing trades, and an 85% winning. When excluding the trades closed due to "finger trouble," the statistics become 2 losing trades, and 80 winning. In turn, this represents 2.5% losing trades, and 97.5% winning. Figure 17.27 shows a screen capture on December 31, 2015.

17-27Figure 17.27

On the lower right part of the figure, we can see the open position gaining $330,000. Including the gains of the open position, the total capital at the time of screen capture is €7,786,261. Converted into USD, it represents $8,460,551. The exchange rate is taken out of the official IG account statement dated January 1, 2016, of Figure 17.28.

17-28Figure 17.28

The complete account statements are available for your transparent verification. Because the markets are in a motive corrective mode since the end of Tuesday, December 29, 2015, it is worthwhile continuing a few days of demo trading until mid-January 2016. Therefore, the status of the demo account will be updated each time interesting results are available. Figure 17-29 shows the status of the demo account on Monday, January 4, the first trading day of the year 2016.

17-29Figure 17.29

The open short position on Thursday 31, 2015 is meanwhile closed. Owing to the large day's trading range, the account shows now a capital of €9,457,155. It has increased by €1,670,894 or 21.5% of capital in one single trading day (see Figures 17.27 and 17.29). Converted into dollars, the capital is now $10,213,727.

Edition 1 of the book was ready for publishing on January 14, 2016. However, I had placed one additional trading order to open Short 150 contracts of TECH-100. This order was executed on January 12, and closed, on January 13, 2016. The insertion of the two next screen captures will be the last modification before Edition 1 goes for publishing.

17-30Figure 17.30

Figure 17.30 shows a screen capture taken on the evening of January 13, 2016. The last trade led to a gain of over $2,000,000 or over 20% of trading capital. Meanwhile, it has grown to €11,828,757. This amount represents a gain of over 118 times or 11,180 percent of initial capital. With the conversion rate indicated on the account statement of Figure 17.31, it becomes $12,853,130. As a reminder, the initial trading capital was €100,000. The second round of demo trading grew the initial capital to €3,101,104 in some two months' time, or around 60 hours of trading. The third round of demo trading grew the capital of €3,101,104 to €11,828,757 in some five months, but with a total of some 20 hours of trading.

Edition 1 must go for publishing in mid-January 2016 while many Buy & Hold Investors could still either protect their invested savings or even profit from the market decline, by applying the Money Printing Strategy. Figure 17.31 shows a screen capture of the demo account statement on January 13, 2016.

17-31Figure 17.31

The account statement confirms the balance of €11,828,757.91. The computer displays the date/time in the Caribbean zone. The time stamp on the account statement shows the Sydney, Australia time zone. This is why it reads January 14, 2016.
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