Simulator: Check What It Charges You
A trading simulator executes orders against live or recorded prices with no money at risk. It is reliable for learning platform mechanics and unreliable for estimating returns, because the fills are granted rather than earned and the costs are frequently understated or absent.
How it works
A simulator accepts orders, tracks positions and moves a balance. Everything a broker does, with no money and no counterparty on the other side.
What it establishes is real. That you can place the right order type, that your stop attaches, that the platform behaves as expected, and that you can execute without hesitating over which button does what.
Those are prerequisites worth learning without money at risk, and they take about a fortnight.
The two assumptions that decide everything
The fill assumption comes first. A resting limit order fills the moment price touches its level; in reality it joins a queue behind everyone who was already there, and may not fill at all.
The cost assumption comes second and matters more. On this site’s shared history the round trip is 2% of a median bar’s range and 45% of the smallest bar. A simulator charging half of that turns a losing method into a winning-looking one, invisibly.
Bar replay deserves its own warning. Stepping through recorded history is an excellent way to practise reading a chart and a very easy thing to cheat at, because the next bars exist and can be peeked at, rewound, or re-run until the outcome is known.
Position sizes drift. A hundred-thousand simulated account gets traded at sizes the same person would never use with their own money, so the resulting return describes a size that will never be taken.
In practice
It cannot reproduce the experience it is recommended for. Holding a losing position is uncomfortable because the money is real; a simulated loss is a number changing colour.
The check is a settings screen. Find the commission and spread the simulator applied, compare them with your broker’s real figures, and recompute anything you were about to rely on.
The fill error is worst in thin volume, where a real order of any size moves price and a simulated one never does.
Slower methods are distorted less. A few ticks of fill quality is a smaller share of a multi-day move than of a ten-tick scalp, so simulated swing results are less misleading than simulated scalping ones.
Some simulators fill a stop at its level across a gap, which cannot happen and removes the largest risk in overnight trading from the record.
A stop that fills exactly at its trigger is the single most consistent difference between simulated and live records.
What to actually use it for
Rehearse the days you cannot practise. A platform outage, an order for ten times the intended size, a position opened in the wrong direction, a stop that failed to attach. Those events are rare enough that a live trader may meet the first one under real pressure.
Write the recovery procedure down while it is cheap to get wrong — which button flattens a position, what the broker’s phone number is, and what you do if the platform will not load while a position is open. That is a use of simulation nothing else replaces, and it takes an afternoon rather than six months.
One more distinction matters when choosing between them: whether the simulator runs on live prices or recorded ones. A live simulator moves at the market’s pace, which is the part that makes a decision feel like a decision. A replay runs at whatever speed you set, which is better for volume of practice and worse for realism.
Both have a place and they train different things. Replay teaches pattern recognition quickly because you can see fifty examples in an hour; a live demo teaches decision-making under a clock. Use replay to learn what a setup looks like and a live demo to learn whether you can act on one, and do not confuse either with evidence about returns.
What a simulator is not
It is not a performance test. The fills are granted, not earned.
It is not psychological preparation. Nothing about it feels like risk.
It is not a backtest. That runs on history; this runs forward.
And it is not a waste of time, used for what it can establish.
When it fails
In a range the cost understatement is fatal to the conclusion. Small bars, many trades and half the real spread produce a profitable-looking curve for a method that loses money live — and a range is exactly where a method takes the most trades.
The second failure is the size drift. Results from a size you would never take are not results.
A third is bar replay with the outcome visible. It is practice for a skill you will not have live.
A fourth is staying in it for months. The mechanics take a fortnight; the rest builds confidence with no basis.
And a fifth is the reverse error — skipping it entirely. Learning order types with real money is an unnecessary expense.
The original data
On this site’s shared 576-bar history the round-trip cost is 0.0098 price units — 2% of the median bar
range of 0.4916 and 45% of the smallest bar of 0.022 — and it exceeds 10% of a bar’s range on 15 of the 576
bars. The base rate for a higher close after one bar is 52% across 571 observations. The figures are in
research/series-measurements.json, produced by site/measure_series.py.
That 45% figure is the number a simulator is most likely to get wrong. On quiet bars the real round trip consumes nearly half the available range, and a simulator applying a fixed narrow spread shows a fraction of it. Before trusting any simulated result, find the spread and commission it used and recompute the curve with your broker’s real numbers — if the method does not survive that substitution, it was a description of the simulator’s assumptions rather than a method.
Related
Paper trading covers what simulated practice can establish. Backtesting is the historical version and its own assumptions. And broker choice is where the real cost figures come from.
The question I ask about any simulator now is what it charges me per round trip, and how it decides my limit order filled. If the documentation does not say, I assume both are flattering. Two questions, and they tell you almost everything about how much the result is worth.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.