I have a new system I want to test out... What is the best way to test it? Isn't there a way to make IB think an account is live where I could get accurate ideas of slippage / commissions. Next step I will go live with very small size but I'd rather try to paper trade the system first if possible. What are the best brokers / programs to paper trade? I have Sierra, Multicharts, IQfeed ---- w/ IB as broker. Thanks!
If you have a funded account with IB, you can start a paper trading account (as opposed to the demo account). This should give you a better idea of executions than sim on your platform.
What will you be trading? I`m very satisfied with the paper trading in Ninjatrader. The fills seems to be fairly accurate with the ES contract in my experience. It might be quite a different issue with a less liquid market or one with higher momentum such as the CL. Obviously, the shorter your time frame, the more relevant your actual fills are. If you hold for hours or days, it does not matter that much.
There are some virtual sites out there. I have an OptionsXpress account that has a virtual trading platform within it. I'd say the best way to papertrade is to push as many buttons as possible. It's one thing to write "buy/sell at $___" on a piece of paper and keep track of your wins/losses, but it's too easy to become skittish when its real money. Getting accustomed to pushing the buttons exactly as it would be in a live trade is a big help for this.
Here are several examples of how not to do it. http://www.elitetrader.com/vb/showthread.php?threadid=221175 http://www.elitetrader.com/vb/showthread.php?s=&threadid=221311 http://www.elitetrader.com/vb/showthread.php?threadid=218728 http://www.elitetrader.com/vb/showt...=113413&perpage=30&highlight=100&pagenumber=2
I would backtest it first to see if its even profitable. Then I would move on to paper trading it or using a Sim account. although in sim accounts there are many issues that will make the results not accurate, especially if you are trading a thin product. often times they cant accurately tell if your order would actually be filled. the sim assumes that if the price trades there then you would automatically be filled, which isnt always the case. if you are trading a liquid product then this isnt really an issue. there is a good blog that covers this issue. the author posts a backtested strategy and then readers posts ideas to improve the strategy and then the results for the improvements are posted. good educational tool bc many of the pitfalls of backtesting and sim trading are covered there. the address is www.backtesters.blogspot.com if anyone wants to check it out. i found it helpful, you might as well.
Beware that some platforms in simulation mode with live feeds will consistently fill a buy order on the bid and a sell order on the ask. Under these unrealistic circumstances, you as a retail trader can scalp your way to quick and certain riches. But don't go out and buy a yacht, until you've tried this with real money! You'll find that on average you're giving up about two ticks per round trip compared to your "Alice in Wonderland" simulated trades. I suppose brokers are happy with this deception, as it makes trading seem far easier than it is going to be once most of your buys get filled on the ask and sells on the bid!
To simulate the emotion of trading as much as you possibly can and then some, while you're paper trading have your wife fck your best friend right in front of you. That oughtta do it.