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Is the demo and real account 100% same thing?

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Is the demo and real account 100% same thing?

#1
Hi,
I always wondered the answer to this question.
I decided to do a simple test of my curiosity!

For this I set up the same EA for two different PCs that will work on the demo and real account of the same brokers and see the results.

- I made all the settings of EA on both accounts the same.
- I have observed that the spread ratios of the demo and real accounts are the same.

A few hours later, I noticed that EA, who works in demo and real account in the same environment, does not order at the same place and same place!

These results have rejected the arguments of the commissioners. "There are definitely some differences between the demo account and the real account on same broker."


In short, a profitable exper in demoda may not give the same performance as a real account! :o

Is that the same thing with all brokers?
Thank you.


Re: Is the demo and real account 100% same thing?

#4
oguz wrote:
Fri May 05, 2017 11:20 am
Hi,
I always wondered the answer to this question.
I decided to do a simple test of my curiosity!

For this I set up the same EA for two different PCs that will work on the demo and real account of the same brokers and see the results.

- I made all the settings of EA on both accounts the same.
- I have observed that the spread ratios of the demo and real accounts are the same.

A few hours later, I noticed that EA, who works in demo and real account in the same environment, does not order at the same place and same place!

These results have rejected the arguments of the commissioners. "There are definitely some differences between the demo account and the real account on same broker."


In short, a profitable exper in demoda may not give the same performance as a real account! :o

Is that the same thing with all brokers?
Thank you.
viewtopic.php?f=578271&t=8472151
Mark Boucher: 70% of a market's moves occurs 20% of the time

Remember: that overnight success usually takes about fifteen years

Re: Is the demo and real account 100% same thing?

#5
bilbao wrote:
Sun May 07, 2017 10:06 pm
oguz wrote:
Fri May 05, 2017 11:20 am
Hi,
I always wondered the answer to this question.
I decided to do a simple test of my curiosity!

For this I set up the same EA for two different PCs that will work on the demo and real account of the same brokers and see the results.

- I made all the settings of EA on both accounts the same.
- I have observed that the spread ratios of the demo and real accounts are the same.

A few hours later, I noticed that EA, who works in demo and real account in the same environment, does not order at the same place and same place!

These results have rejected the arguments of the commissioners. "There are definitely some differences between the demo account and the real account on same broker."


In short, a profitable exper in demoda may not give the same performance as a real account! :o

Is that the same thing with all brokers?
Thank you.
viewtopic.php?f=578271&t=8472151
Everybody should see that post - it explains a lot


Re: Is the demo and real account 100% same thing?

#6
@oguz, Good job for the test. Generally you are right- the demo strategies never work on live, because it is not the same :) Almost every time the latency is the different, which will affect on the EA positions opening time & execution time. Additionally, the demo is without slippage, as the live is with slippage :)

Re: Is the demo and real account 100% same thing?

#7
Below article may answer a small part of your question. Hope it helps:

"Let's discuss the difference of two expert advisors (fully automated) running in parallel at the same time (same currency pair, same broker, etc), one on a demo and the other on a live account. "Forward testing on a small live account is better than on a demo account." Why?

Let's not discuss the psychological factor.

We all know that it differs in:

- slippage
- requote
- spread
- commission costs
- swap costs

But what else does live differ from demo trading?
- for example, is the data feed exactly the same or is there difference in manipulation?
- do indicators interpret price differently somehow in anyway sometimes?
- is the execution slower in live trading?
- is the price quote sometimes less renewed in live trading? (for example, when there is big news)
- are the price feeds of live and demo on 2 different servers? And if so, what is the difference then? For example, does a demo not have requotes?
- is there a difference in margin call? Or does for example my Alpari broker close the position earlier on a live account?
- do brokers treat my position differently on a live account from 5 lotsize in comparison to 0.01 lotsize? Could anyone please explain this: "Brokers or Banks look for stoplosses to flush big lotsize positions out. "
- other differences?

Reply:
The only 'real' difference between demo trading and live trading, provided you are using a reputable broker is in slippage and sometimes exchange rate impacts and SWAP. For example in MT4 backtesting land, SWAP is not included in the results and typically the variable spread at the time of running the backtest is used as a proxy for the historical spread. The latter however can now be resolved in some backtest applications in the MT4 environment......however SWAP and Exchange rate impact on the base currency will only ever be based on using the current variables from your broker as a basis for historical application.

Slippage on the other hand is definitely a factor to also consider when moving from demo to live trading environments.

I think those that are looking for accuracy between Demo and live trading will always be disappointed because they will never agree. It is not usually through dodgy broker practices however....but rather the perturbation that exists in any price series of a liquid market.

Hopefully everyone who trades recognizes that it is probabilities that rule the game as opposed to preciseness. If you want to be precise when flipping a coin and determining if it will come up as heads and not tails...then be my guest...however the perturbation that exists in a single coin toss demonstrates that you can't play the game this way. You need to apply the Law of Large numbers to come to a solution.

There is enough 'noise' in a return series from a live trade than there is in a demo one. You can see this when you plot where your 'actual' return series resides in a shuffling of that return series through bootstrapping.

Attached Image (click to enlarge)
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If you get identical monkeys or even two identical seperate EA's to live trade together on two separate accounts, this feature between the disparity between return streams from perturbations in data receipt or trade efficacy will become self-evident.

Each of those particular return series from the bootstrap chart above are entirely possible. This simply demonstrates that this game is not one of preciseness but probabilities. An edge will only play out over an extended data series just like a biased coin....so this therefore puts a different take on what you should be gaining from backtesting or forward testing your strategy.

Note that the bootstrap series above was generated from a strategy with only the faintest edge. In fact it was not a worthwhile strategy to progress no matter what the individual return stream produced looked like. This is one way to detect how 'randomness' can fool you. Only if the entire sequence of distributions displayed a positive return could you be satisfied that your strategy had enough cohonas to beat the noise of the market.

You are not testing for preciseness but rather the robustness of a general principle and whether that general principle holds up under the Law of Large numbers. The folks who get the most out of backtesting realise this principle is implicit in their results.....but are rather simply testing whether the general principle of say divergence or convergence play out over the long term and what scenarios could be generated by that deployed strategy over the long term and by applying the Law of Large numbers in your testing. It gives you a road map into uncertainty that allows you to determine whether your live strategy lies within the bounds of acceptability of that road map.

third reply:
many people forget one important part:

why a broker has demo accounts? yes, people can practice, but main reason is to test the broker and decide between different brokers, and thats the problem same time.
any broker wants best running demo server, best prices possible , best speed, best server..... all best that people win in most easy way with demoaccount with this broker and decide to open later the real account with this broker! so anything is optimated in demoaccounts to let people win, any little part! demoaccounts are easy ways for best marketing.

biggest differences are so:
- order fill spead
- slippage
- volume (on demo you get any volume filled for the lowest spread for the lowest volume, in real account only whats possible in the market at this moment and you get it for the sprrad this volume will have or you get requote or rejection)
- all trading styles have big wins in demo, even styles that dont win in reality with this broker, like arbitrage or stop order setting in newstrading and so on........
- many many more.... any part in demo is optimized to show this broker at best , its nothing same like in real account, only broker name and some generall settings for currencies, like leverage or margin call.....

there are some brokers, who dont do it in this extrem way, but most do it. even this other brokers have all the differences same time, maybe not in the extrem optimiced way...

fourth reply:
VeeFX: Forward/Parallel Stress Testing
Before downloading the platform, the first question is ask the broker is - "Is your trading conditions exactly the same between demo and live" based on the live account type I would prefer to open? If no, I run away from the broker.
Before going live, I have shared some techniques (search "TradingCostMultiple") in my recent posts on how to ensure your demo and live trading results are close... very close.
Next, run a spread recorder on both live and demo before opening your first live trade... the bid should be pretty close.
Next, download OHLC history data files from both live and demo platforms and run a quick OHLC compare in excel. they should be close.
Always check the server timestamp between demo and live servers including gmtoffset. Many brokers do some funky business on Friday or on weekends
Periodically Compare swaps and commissions between demo and live
Needless to say, you must always ensure skipping a trade because of max slippage or max spread settings should have zero effect on your strategy outcome. I have said before, dependance on one trade to open another trade is just big no in my book. A trade should stand on it's own merit and a single trade should have little to no effect on the overall PnL.
Reminder-spread widening can happen on exits too. I have seen many EAs check for only entries which is idiotic. Every trade is a market order and prone to spread widening and slippage
Ihave said this before.... I will remain a demo trader FOR LIFE. I run demo and Live accounts in parallel and I run everything locally and nothing on VPS. I never backtest in strategy tester.
Do all of the above and more and your demo forward testing will be very close to live trading..... as long as the broker does not mess with your connectivity between terminal and their server.... mine has already started playing some strange games so at the end, broker must win so make sure your "profitable" strategy generates some decent amount of spreads and/commissions to keep your scam broker happy (keep you on A book and pass your trade over to LP). After all this, you can only hope and pray your broker will eave you alone and not mess with your hard earned profits during withdrawal time :-)

There is a reason why I advocate

Trade Small
Trade Often
Use Law of Large Numbers
Use Law of Averages (by this I don't mean scaling in or adding to losers!)
These should avoid most of the issues with spreads, slippage, swaps, commissions platform freezes, price manipulations etc or at least minimize their negative effects on your trading outcome. These "normal" cost of doing business should not determine whether you have a profitable strategy or not. My TradingCostMultiple is 20 times the cost of trading during forward/parallel testing in demo. It might differ a little bit here and there but strategy can never fail in live and flourish in demo!

Edit: and more information here


Fifth reply:
I wont share too much on #1 as my options across brokers are quite limited. I have moved to monthly now instead of weekly. It also addresses the fact that brokers will expire/delete demo account and now all your stats is gone are done forever. Better to have a robust infrastructure to avoid losing any of your hard work based on broker actions. You have to own it and take charge of your own future. no one will !

On #2, it is not moving averages. By scale-in, I mean, if you have a 1standard lot capacity, breaking trade size into 10 minilot etc and seeking a better average entry price by doing price discovery. It is just an excuse for folks who like to "average-in" to recover from their losers. Why would you smoke pot if you don't want to be anywhere near hard-core drugs? Scale-in strategies will only entice you to average-in or martingale or add to losers etc.

One trade should have no affect on the next one.... I just trade small in whatever direction, in whatever pair, in whatever timeframe and in whatever session the signal comes knocking at my door... and rely on law of large numbers and law of averages to take care of the rest.... mostly until Friday and in some case before the month ends.

EDIT: I have demo account across multiple brokers to hardened my strategy... again, law of large numbers :-)
EDIT1: I am not sure if I mentioned this... do NOT ever "verify track records" with external sites including TE. Your records must remain under your own custody at all times. myFXBook allows hooking without verification which is what I like. Also, NEVER run a demo and live account from the same terminal instance... I know this shit too much so I must stop here:-(

EDIT2: Also, ALWAYS install MT4 under "Program Files" folder to get the added OS level security protections... never outside. Do not listen to anyone who says, install under c:\ drive... and reject ALL executables that require turning on the "Allow DLL" setting in MT4.

sixth reply:
Actually with some brokers you get slipped on demo, IG for instance and hotforex has swaps.


I read on a forum: "The more $$ you make with brokers, the more execution lag & delay you will encounter."

Is this true?

reply: when you broker is your counterpart of the trades, yes. if not, no, only when you try to "cheat" like with some arbitrage plans to use slow datafeeds of some metatrader brokers, so they protect against this by execution lag or delay to not going bankrupt, by real trading you really need some broker who is opposite trade as marketmaker in all your trades.

Though demo trading accounts offer opportunities to get acquaintances with the forex market with the use of artificial money as real accounts, there are some differences between the live accounts and demo trading accounts. A trader can face the difficulties regarding the trade executions and he can also face hardship while engaging in trades with big amount. There is no such difficulty in case of demo trading accounts no matter which amount you are trying to trade.

Re: Is the demo and real account 100% same thing?

#8
This is an article I read:

Differences between demo and real trading environments

If you have traded a demo account and have been trading a live account it is not hard to miss the fact that in most cases, trade orders on a forex demo account are usually executed with ease without any problems. However, when you start trading the live forex accounts, you might find that at times your pending orders might not get filled. This is due to the fact that the environment a trader is trading in is vastly different from the real time markets.

Besides the order executions, other subtle differences can also come out of other aspects:

You are never re-quoted in a demo trading environment as it is a more controlled environment and therefore traders get sucked into a feeling of complacency. Whereas, if you were trading in a live market environment, re-quotes is something that traders have to live with and there is no way around it.
Spreads are usually tighter in a demo trading environment. Compare this to a real trading account and you might the difference in spreads being as much as 1 pip. This is more evident if you were trading with a variable spread broker where the market conditions and the liquidity providers dictate the spreads
Stop loss order execution is also always executed perfectly in a demo trading environment, unlike a real trading account where traders often complain that the broker executed their stop loss orders at a higher level thus risking a bit more than what the trader had hoped for.
The main reason as to why the differences arise between a demo and live trading environments is because of the data feed. A broker has to pay a certain fee in order to access the live market quotes. On top of this, there are additional overheads such as liquidity provider’s fee and so on, which makes it a bit more expensive. Because demo accounts can be opened free of cost, it doesn’t make business sense for the forex broker to offer the same live feed and trading conditions in the demo trading environment.

The reasons mentioned above shows how different a demo trading environment can be compared to the live trading accounts. However, with all that being said, demo trading accounts nonetheless offers traders access to the forex markets to test out strategies or to learn from the markets.



What are the benefits of a demo trading account?

Demo trading accounts offer a risk free trading environment for the traders. This is particularly useful to beginners in forex trading as it helps them to get accustomed to the markets. Besides the above, a demo trading account can also be used to trade the various instruments that are offered by the broker. Although the spreads and/or commissions may differ, they closely mirror the real trading environment. In this aspect a demo account can also be used to test the trading conditions provided by the broker.

Once traders are familiar with the demo trading conditions, they can then move to trading in a real account. Traders can then opt for a micro or a forex cent account which can help them to accurately gauge the actual trading conditions as well as the market conditions with the broker. Most brokers nowadays offer micro forex trading accounts start with deposits for as little as $1. (On our website ProfitF you can find Best Forex Broker – Comparison Table) These micro accounts could very well be the next step for traders to test out their potential forex broker before finally opening a standard trading account.

Execution Related Differences Between Live and Demo Accounts
The following potential causes for performance differences observed between live and demo account trading can be attributed to execution issues:

A forex broker may never requote a price to a demo account trader, but they might often requote live prices in actual practice.
The broker’s price feed and dealing spreads for demo trading may well differ from the pricing that is provided for live trading accounts.
The broker may execute demo stop loss orders accurately, but considerable slippage may occur in a live trading environment.
Broker errors that sometimes arise when trading can cost a trader considerable time, effort and even money when attempting to resolve them via the broker’s customer service department. Most traders would not observe or would ignore this phenomenon when demo trading.
Sometimes a broker will not offer their real trading platform for demonstration purposes. This can mean that the trader needs to learn and acclimate to a new platform when switching to live trading
Trader Related Differences Between Live and Demo Accounts
The following potential causes for performance differences observed between live and demo account trading can be attributed to trader issues:

A possible lack of emotional commitment when no real money is at stake may create an unrealistically positive trading environment in demo trading that is not found in live trading when the trader’s account funds are actually on the line.
A trader’s failure to following their trading plan has no real consequences. As a result, a trader may develop bad discipline-related habits that can cost them money when trading live.
Traders might be tempted to overtrade or insufficiently evaluate risk when trading in a demo account. This behavior can then have serious negative consequences when they switch to engaging in live trading.
Demo Trading Benefits
Trading virtual money removes the psychological element from trading, so for this reason, it cannot accurately assess a person’s trading abilities. Nevertheless, virtual trading can have great benefits when testing the performance of a trade plan and also for trader education purposes.

When used as an educational tool, a forex demo account gives novices a risk-free start to trading in the forex market. In addition, strategies can be put to the test without assuming any risk, all in real time trading situations.

Overall, trading in a demo account offers a great service to novices that would otherwise have to learn using, and probably losing, real money. While the emotional rush of risking real money while trading may be lacking in demo trading, trading a demo account allows you to learn to watch the market closely and can help you get a better feel for how the forex market operates without putting any real cash on the line.

Consider Using a Micro Account Instead of Demo Account
To get around some of the aforementioned causes of performance differences between live and demo account, some traders have chosen to open micro or mini accounts with a forex broker, using a small amount of funds rather than funding their entire trading account right away.

This strategy allows them to test out the forex broker or trading strategies in a live trading environment, while not putting their primary account funds at risk of loss.




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