Ok, so I’ve been messing with demo account off and on for the last 2-3 years. I started a new stategy on a demo account at IBFX.com (Interbank FX) and I’m doing very well. At this point I’m thinking about going live, but I’m hesitant because I know a live account will act differently than a demo account… I just don’t know how different.
I mainly trade the eur/usd. At IBFX the spread is 2 pips. However, during a volatile market, I know the spread will widen. Unfortunately it doesn’t do this on a demo (They say it does, but I haven’t seen it… Maybe I just don’t have the platform open for these times). I’ve been avoiding the news announcements on my demo even though they don’t widen (I think) because I want to trade just like I would if it were a live account. This brings me to my concern…
*Lets say I enter a trade while the spread is just 2 pips. Somewhere in the middle of the trade it widens… let’s say to 8 pips. What are the possible problems I would face with the spread widening from 2 pips to 8 in the middle of my trade? How could it effect my stop loss and take profit?
*Does the spread widen often on the eur/usd at ibfx?
*What other problems will I face going to a live acct vs a demo and how severe are the problems?
What I’m afraid of is that I’m doing extremely well on my demo, but if I do the same thing on a live account will it work?
Any answers to my questions above would be greatly appreciated! The one I’m most concerned with is about the spread widening during a trade.
It sounds like your hyping yourself up into an idea that a live account will be drastically different. Trust me, dont go there psychologically. If you are consistantly profitable on your demo. Go live with a very low lot size and test the waters. dont psych yourself out.
Hi Doug,
Demo and live are exactly the same except the money is real and how you handle that fact.
I trade eur/usd (with ibfx) all the time and have never spent more than 2 pips.
Yes it will go up during certain times. News and opening on Sunday are going to be the most common. If spread widens it will not effect the trade you are already in because you have already paid the roundturn.
I am treating my demo just like I would a live acct. I just wanted to make sure on ibfx’s side the things are the same.
What do you mean by never spent more than 2 pips? I assuming you mean you never entered a trade when the spread was more than 2, right?
That is what I have been doing on demo, but I never see the spread more than 2 pips on the demo… that is why I was concerned. I thought maybe on a live account it would happen frequently which of course would have an impact on me and make the live trading diff than the demo.
Here’s my take on demo vs live. Their really isn’t enough of a difference to matter cept if you trade news or scalp on very short time frames BOTH of which I think shouldn’t be done by anyone new to forex. Unless of course you have an awsome mentor that can do it successfully and consistantly, good luck finding that.
Seriously the only difference is you. Like everyone when things go really well or terrible you’ll get overconfident or fearful and stop following your system. You WILL. Just be ready for when you do this and correct it ASAP! Its normal for traders to freakout when they have their first big loss or gain. It’s really helped me also to log all the times I’ve taken trades that were not part of my trading system. Sure enough 90% of them have been bad news. Learn to cut these types of trades out and fast.
It’s not just me, that’s how spreads work in a general sense. If your platform buffers you from paying the spread as you would in a normal market, I can’t say.
So if you went long while the spread was 4pips, and then went to 20pips during your trade, your stops wouldn’t see that 20pip spread, they’d somehow ignore the spread and keep you in the market? I’m terribly confused
My price is always at bid. Whatever spread I am going to pay is done at order. After the order is placed, spread no longer effects me. Once in, the bid price is where I will always get filled.
My roundturn is done upfront. I don’t know how ecn’s work. Most likely using a real bid/ask for buy and sell where each trip is calculated at the in and out.
2-3 years is a way long time to just demo trade … it is time to get your feet wet and as Cap’n Ron said (Kurt Russell) [I]“If anything is going to happen, it’ll happen out there!”[/I]
The only way you’ll know how a live account will work for you will be to give it a try … I suggest a micro account, put in $1k and trade away, at 10 cents a pip the spread differences should not bother you. If IBFX does not do micros, try FX Solutions … I opened & funded an account with them within 4 hours and their trading platform rocks. I have no idea about spreads because I mostly ignore them, and I trade the guppy which has huge spreads at the best of times.
mytwopips is correct … the main difference between demo & live will be YOU and how you handle the thought of using real money. That is why I suggest a micro account to start. If you’ve been clinging to the demo security blanket for nearly 3 years and you are concerned about a 2 pip spread widening at times … there is a real money issue … so start small and you should be able to grow into it
In the thumbnails below I have given a pictorial representation
of a short trade.
SHORT TRADE
On opening the trade the price we are given is the bid price (the
lowest of the 2 prices) here represented by 6.8850.
But our trade starts & stays with the ask price (the highest of the 2 prices)
the bid price can now be forgotten it can now be called the opening price.
The spread expands due to high volitilty, our open price is still at 6.8850,
so the ask price moves to 6.9105 we are now 255 pips down. If we have a
stop loss up here it will be taken out.
The market moves down as we expected, our open price is still at 6.8850,
now the ask price is at 6.8680, +170 pips & our profit is taken.
In a long trade the reverse is true, ask=open, bid moves up or down on chart.
