Help...i need some experience based advice,

Hie there.

Am still new to forex trading but have a firm background in financial analysis. I have been using the free demo account on FXCM and have been making good profits on virtual money, is it an obvious indication i am good at it and will translate real money into profits? I just want to make sure i wont find any new surprises after depositing real funds?

thanks in advance for your most kind responses

In my opinion- Demo trading results may or may not carry over to live trading.
For some it will, for some it won’t.

Trading isn’t as black and white as many folks would like for it to be.
Your success is really going to be based on who you are as an individual- emotionally, genetically, etc etc.

Here’s my advice- if you’re pulling down consistent results w/ fxcm, open a live account.
Minimum to fund is $2K.

This doesn’t mean you need to be trading 50:1.
Just trade 1 or 2 micro lots, so you can test your emotions and psyche when real money is on the line.
Gradually increase your risk parameters to levels you’re comfortable with.

Here’s an old adage- if you can’t walk away from the screen, put down the phone, or go to sleep while a position is on- you’re most likely over-leveraged.


Thats very helpful, thanks a lot

Focus on the process- not the results.
Focus on the process- not the results.
Focus on the process- not the results.

Drill that into your head.

Hi Enteg,

Welcome to BabyPips! :slight_smile:

In my experience, the correlation between your demo performance and your live performance will depend on the following factors:

[B]1. How realistic are the trade sizes you are using?[/B]

The default FXCM demo settings give you a starting virtual balance of $50,000 but what amount are you looking to invest? Keep your trade sizes realistic to the capital you have to invest. As a general rule of thumb, try not to exceed 10:1 effective leverage. That means you should consider opening no more than 1k for every $100 in your account. Jake mentioned that you can open an FXCM account with as little as $2000. With that amount you could trade up to 20k or 20 micro lots and still stay within 10:1 leverage.

[B]2. What percentage of your equity did you risk on your demo trades?[/B]

With virtual money it’s easy to stay calm when you equity drops 20%, because no real money is at risk. With a live account, such losses are hard to stomach. Try not to risk more than 2% to 5% of your equity on any trade, and by that I mean 2% to 5% of the equity you plan to invest with real money. So if you plan to invest $2000, then try not to risk more than $20 to $50 on any one trade. Note that you can still place long term trades. For example, on a 1k micro lot trade, you’re risking 10 cents per pip, so with $50, you could risk up to 500 pips.

[B]3. Does your demo trading strategy rely on perfect liquidity?[/B] (which does not exist in the real market)

Investopedia defines liquidity as follows: [I]The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.[/I]

For example, EUR/USD is the most liquid financial instrument in the world, but even for that most liquid currency pair, the liquidity will drop during news events. If your demo strategy is longer term and doesn’t place trades during news events, then your results on a live account with the same trades would likely be comparable.

However, if your demo strategy relies on getting filled at the exact price you requested during news events, you may find that such a strategy will not perform as well in the real market. That’s because no demo can replicate the liquidity or lack thereof during major news events. That means your real market orders could be more prone to slippage.

Slippage is when your order is filled at a different price than you requested. The good news with FXCM is that slippage can be positive as well as negative. Positive slippage is when your order gets filled at a better price than you requested. Below are the stats from over 43 million live trades executed through FXCM from August 2013 to January 2014. In just those six months alone, FXCM clients benefited from over $15 million in positive slippage: Positive Slippage and Price Improvements - FXCM UK

[li]73% of all orders had no slippage.
[/li][li]15% of all orders received positive slippage.
[/li][li]12% of all orders received negative slippage.
[/li][li]Over 60% of all limit and limit entry orders received positive slippage.
[/li][li]53.32% of all stop and stop entry orders received negative slippage.
Note that positive slippage is more likely to occur with limit (take profit) orders, while negative slippage is more likely to occur with stop orders. That’s due to the momentum of price movement when those particular order types are triggered.

It’s also worth noting that for market orders, Trading Station has a feature called Market Range that allows you to specify how much negative slippage you’re willing to accept on an order if any. For example, if you set your Market Range to 3 then you market order will only be filled if the best available price in the market is within 3 pips of the price you clicked on. Otherwise, your market order gets cancelled. Note that this feature only limits you’re negative slippage. You’re still able to benefit from any positive slippage even if it’s greater than 3 pips. The video below has more info on how you can use the Market Range feature.

If you have any questions about your FXCM demo, please don’t hesitate to ask me in the Broker Aid Station.