Is there an advantage to demo trading really?

There is no slippage in demo trading, which is the real enemy most likely in live trading, so why do this “trial” period?

Since there is no slippage in demo trading whats the point?
If you want to give a strategy a “waiting period” before live trading it, why not just wait X amount of months then backtest on that those months after?

You are probably better off just live trading it on micro lots as a trial period honesty. Atleast you’ll get the slippage.

If the EA is completely unprofitable on a demo, with much bigger drawdowns than seen during backtesting/development, then you can discard that strategy as curved fitted or somehow wrong in reality, without costing a live account.

By contrast, if the EA is profitable on the demo account, it does not mean it is a workable strategy, only a live forward test will show that.

So unless you have lots of $1000 accounts to test out the strategies on, I think it makes sense to see if the strategy wipes out a demo account.  I’d be surprised if a strategy that proved unprofitable on a demo account was profitable on a live account, so I see it as another filter in the development process.

Maybe others disagree?

If the EA is completely unprofitable on a demo, with much bigger drawdowns than seen during backtesting/development, then you can discard that strategy as curved fitted or somehow wrong in reality, without costing a live account.

 

Maybe others disagree?

I disagree in the sense that you have the option to not install, and run, yet another instance of MT4 for several months. You can simply wait, then back test it after X amount of months.

So why demo it? Just wait, then backtest it. There’s no advantage to running on demo for 6 months over waiting 6 months then simply backtesting it.

The latter option has 1 less program running all the time and saves some time in your life as well if you are someone who constantly checks how your EA is doing in demo every day. 1 less distraction.

“I believe good trading is not about getting rich quick, but surviving the longest.” I’ve read that book.

Its a general axiom repeated throughout the trading world. If it was in a book, then I’ve long forgot which one it was. Refresher?

Perhaps not in retail.

Its perception. Setting out to get rich quick is often the false mindset of the retail trader which generally results in imploding quickly.

“Surviving the longest” means you consistently made money without self destructing. Small % return YoY means A LOT of money in the long term, even with a very small starting sum. Warren Buffett YoY is only 16-17%. Do that for a lifetime, and its millions and millions of dollars. Aim for 100% year, and you have to be one of the extremely, extremely, rare breeds who can keep that up for an extended period. Dunn Capital which is considered one of the crazier roller coasters out there aims for only 40-60% YoY (with DDs as much as 40% atleast 1 time I believe).
An account of 50k compounded @ 16% (which isn’t that high of a goal really and doesn’t require much risk or downside either) for 40 years is almost 20 million dollars.

Just wanted to clear up my perception of why I like the saying. Not much to be added to the thread anyway.

Totally agree, I never used any demo trading account for automated strategies. Either I put them live directly, or for some do wait a month or two and just (tick data) backtest them afterwards for that month (I am logging all tick-data each pair from my broker anyhow via a separate VPS and so can easily use that to do a real accurate backtest later on and how it would have done at my broker exactly). Never understood the concept of demo accounts for automated systems. Just makes sense for manual traders that practice.

But are you talking about using tick data from the broker you will be running with, or tick data from say dukascopy, because demo testing will hopefully show if there’s a difference in the broker feed vs duksascopy?

To me the demo account tests the broker on the strategy, not the other way round:

1. Differences in price feed, spread, slippage, execution time
2. Any errors you might not expect, such as off market quote errors, timeouts and other tricks.

I am using the tick data of my own broker. I log it with my own EA since years already.

Sure, slippage, execution time etc must be good as well, but I know it´s good at my broker, so don´t have to worry about that.

M1 Broker data. Any broker usually supplies atleast 1 year M1 data.

Extreme spread widening does not occur during low liquidity news events on demo accounts. That is why live accounts are preferable.

And as already stated, demo doesn’t have slippage. That was in the original post. I also don’t believe demo has off quotes, or timeouts. They aren’t actually executing your trades on a “demo exchange”. Its demo. Its fake.

Slippage, spread widening, off quotes, and timeouts have to do with executing real trades on a real exchange. Demo fills orders perfectly. You are getting false positives believing demo results are the same as live results.

You don’t need to open a 1000 account for every system you make to test it. Why not just 1 1000 account and put all test systems on it with 0.01 trade size? You can observe their results separately on the DisplayPanelinfo.

Exactly, use live with 0.01 lots is the best test. No demo needed:)

I am using the tick data of my own broker. I log it with my own EA since years already.

 

Sure, slippage, execution time etc must be good as well, but I know it´s good at my broker, so don´t have to worry about that.

Here’s the sort of thing you won’t find backtesting vs demo trading.

Most ECN brokers have a 5 minute window after midnight MT4 Server time, where prices are streamed, but trading is not possible.

From Pepperstone website:

The Pepperstone rollover occurs at 0:00 MT4 server time. At this time swaps are applied to accounts for positions held and all the large investment banks around the world reset their systems and reboot in preparation for the new trading day ‘“ Pepperstone also being an ECN observes this 5 minute blackout time. During this time there are low/no quotes being issued as the majority of the banks are essentially closed for this 5 minute window ‘“ This results in spreads blowing out and very large spikes/volatility (due to the low liquidity) in the markets and gaps in the prices can appear
Every day from 0:00 ‘“ 0:05 ‘“ The Market will be closed for trading. Non-executable prices will still be streamed through the platform at this time.

 

When I backtest using Pepperstone data and Dukascopy data (shifted to New York close using TickStory), I get completely different results on strategies that trade regularly at this time vs what I see on the demo account.

Those are things to check out before. My broker doesn´t do that and my strategies usually open their trades during the more active sessions. Actually I never had a trade near rollover for the last 2 months. You might want to look into other strategies if they so heavily depend on opening trades during rollover.

Those are things to check out before. My broker doesn´t do that and my strategies usually open their trades during the more active sessions. Actually I never had a trade near rollover for the last 2 months. You might want to look into other strategies if they so heavily depend on opening trades during rollover.

I find it just easier to demo trade to be honest. Take the EA, copy it over, start it running for a few weeks. Each to their own though. 🙂

Sure sure, their is no “right way”. Only profit counts in the end and hope we all make some (more) 😉

Demo trading is ok for larger time frames whereby small differences caused by order execution / market slippage / spreads will not mean the difference between a profitable strategy becoming unprofitable. The problem is when backtesting smaller time frames like the 1 minute or 5 minute. It should also be noted that trading live accounts on 1 minute or 5 minute time frames will not succeed if using a Non ECN Market Maker account whereby they take out their commission via the spread. This is because when you add both the spread and slippage together you get an unrealistic entry and exit point on these smaller time frames. If you have one of these type of accounts (A Non ECN Market Maker – commission free account) load up a 1 or 5 minute chart and take a look at where your order is filled once you open a position. You will notice straight away that it would be impossible to actively trade these small time frames using these type of accounts. For traders wanting to trade smaller time frames, open a Direct Market Access / ECN Account whereby you pay a commission on each trade with either zero to very small spread.