Demo account results vs real live trading

Discussion in 'Forex' started by Option Trader, Aug 24, 2010.

  1. Hello.

    I know some of you are very experienced forex traders, so I am seeking a little guidance.

    Can it be that your demo results will show you triple your money but in real live trading you lose money?

    What broker would you recommend to remove the issue of foul play of the broker, even if it means e.g. higher commissions?
  2. Am I the first one to come up with these issues?
  3. This isn't a very useful description of the problem. What's different between simulation and live trading? Are you getting crappy fills?
  4. I'm standing pre-live trading, concerned about games brokers or market makers play.

    I would imagine they are usually your counterparty and wrench the neck of their customers.
  5. cstfx


    An ECN broker is what you SHOULD go with as there is no supposed to be any manipulation of pricing and they supposedly do not trade against you, aka take the other side of your trade. There are few retail ECN models to choose from, the top ones (US) being MB Trading, IB, and a few Currenex brokers such as PFG and FXDD. You will pay a commission based on dollar volume but should not have to deal with the various price spikes that dealing desks tend to have (do a search about this).

    There are a few good dd brokers people recommend, the most probably being Oanda.

    As to demo vs. reality, as you know, with any demo account, it is mostly about the trader psychology and risk tolerance. In a demo, the trader will sit with a position longer because it is not his money on the line, and that will skew the results. Also, with demos, you get fills when a price is touched - this ignores where you stand in line in order to have YOUR order filled, so that will skew results too. And with demos, you can always reset your results until you get the numbers you want.

    Hope this helps.

    Also, even in the fine print of your broker agreement, there is a little phrase that bugs people which says the broker is the counter party to your trade - this is true of all brokers unless you are a tier 1 player - if you are trading THOROUGH another broker, say IB, then they are the party that offsets the trade with DB or Citi, not you. You are trading thru your broker, not directly with the other banks. This tends to be a little misleading when ECNs say you trade directly with another party - you don't really.
  6. I agree with recommending a major ECN broker. I've used IB, and while I don't really like the "feel" of the ECN FX markets for short term trading, I think IB did a pretty good job on presenting what was on the ECN to my console.

    If you have a 3rd party data feed to compare your broker's data feed to, that goes a long ways towards ferreting out any funny business.
  7. LeeD


    What cstfx wrote is very thorough advice.

    One more thing to consider is whether what you are doing is sensitive to fills. If you do only market orders many ECNs offer pretty good simulated execution. However, if you heavily rely on limit orders, in particular you may alwasy try to buy at bid and sell at ask price, result in a paper trading account can significantly vary from real trading.

    Beware each ECN has their own (slightly different) rates. So, if you get a 3rd party feed fro FXAll, you can use it with MB Trading (they execut foreign exchange trades via FXAll) but IB will have slightly different excahange rates.
  8. HotspotFX
    Interactive Brokers

    Don't use brokers like FXCM. In principle avoid any broker who has ads running which say: No requotes!!, Trade out of the chart and all of that ridiculous amateur slogans.

    For charting use ESignal. They get the quotes from Tradesignal, a highly reliable data provider.
  9. Thanks to each one of you.

    What about the possibility of establishing a relationship directly with the clearance firm (I saw this idea on Google)? Is there any such idea available without having to have millions?
  10. cstfx


    HotspotFX sold their retail arm to FXCM about 2 yrs ago and their institutional is available thru various primes.

    Can you establish a direct relationship? Again, no, unless you are a tier 1 player, i.e. DB, CITI, Daiwa, GS, etc, etc. You have to go thru a prime broker. Even multibillion dollar hedge funds trade currencies thru their prime. The Cheapest prime I have seen right now is 250k with vCap futures.
    #10     Aug 25, 2010