Demo Account Vs Live Account

Filed Under (Journal) by Casey on 16-06-2010

This debate seems long been settled. EA operating on demo account sometimes means jack. It may perform well on demo but it might not perform well live.

It’s very logical really. When we open a demo account, we are connected to a different server. The price we see is the price we get. But when it comes to live account, it’s either our orders are filled via a dealing desk or whether the market will take your order.

However, I never have any experiences with ECN brokers so I can not say for sure if demo vs live account on ECN broker does have a differences.

On top of that there is an issue of latency… How ones MT4 connects to your brokers server.

Initially people would rely on backtesting results to see if a EA is worth their time to invest in. But after very wide inconsistent results. The masses have moved to looking at the performances of a demo account to make their judgement.

And… now it seems that even demo account is not a good indication of a good performing EA.

Even these two sites… and are two examples of review sites that once upon a time rely on demo account to verify the performances of an EA have seems to move away from demo account. I am assuming that is not demoing any EA since they have taken down the their demo display chart. They have now since moved to being a store displaying live account charts.

I believe that both the validity of these two tier indication (backtesting and demo account) are 50% accurate. Well mostly because most of the EA out there were scalping EAs. And scalpers only take 5 to 10 pips per trade moving in and out like ninjas in the night.

And I guess it has been proven that one can not use these ‘not so accurate’ method to tests a scalping EA’s strength.

My view is that probably if one were to use say a trending EA or a breakout EA on a higher time frame than 15M. Then probably backtesting and demo account might prove as a useful tool. Of course these type of EA is as sexy as Lindsay Lohan snorting coke. But most of these EA has not seen the light of it’s demo days…

Backtesting trending and breakout EAs or even Martingale EAs on a demo account might give rise to the accuracy of these EA on a live account.

For one reason, on a higher timeframe which when backtested, will use more data per timeframe to enter and exit and of course should logically speaking give rise to higher accuracy.

Secondly, when place in a demo account, these sort of EA does not really bother much with whether you enter 0.0005 or 0.0015 pip higher or lower.

For scalping EA, that sort of variables matters. In demo… if it’s displayed at 1.2592, the EA will enter or exit at 1.2592. In a live account… well… only your internet connection, broker’s server and the market knows if you will get your order fill at 1.2592.

So… I believe it is time for me to go demo again. Why? Well… it’s because I feel the need to see how an EA work by my own eyes and hands. I am of course going to use a demo account to fiddle with settings in a ‘live’ manner on a demo account to see what makes it tick.

And so… it is with great pleasure for me to set up a new demo account page. A place where I ‘show-off’ some EA that I find interesting to fiddle around with comfort and slowly with confidences, I shall then move it to my live account. Contradicting myself here… I might not rule out testing scalping EA on demo. One of my criteria to test out scalping EA on demo would be to see if there are any good live account which that particular EA has been tested.

I have already set up a few demo accounts, and started tested these interesting EA out. I guess I will take some time to do a write up one at a time. This will allow me to keep a live journal of any changes or any tweaking of the settings and see if it’s worth it to add it to my live account…

There is no rush in the realms of forex.

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