Tracking Results

There is a lot of misinformation when using a demo account for tracking forward real time performance that perspective clients can reliably use to evaluate a systems results. So whats the real difference? Firstly, for forward trading in a demo vs. in a live account it really depends on the system's trading style and strategy and secondly for backtesting results if the the system was optimized or curve fitted to get a result that's manipulated by the system developer.

 

For scaplers who are in and out on average of less than 10 minutes for very small gains of 10 points or less, then its important that the account is live to reflect the true transactional costs for slippage and spreads, including commissions if applicable which can eat up most if not all of the scalpers profits and in many cases will show a net loss. If a scalper is using a demo account, these costs won't show up which is why a real account should be used to track performance in order for the system to be taken seriously.

 

We use a demo account for backtesting and optimization (but never curve fitted) that covers a period of one (1) year and four (4) months in a beta phase trading forward with live data. If the beta phase produces positive results based on our comprehensive criteria that's consistent with our backtesting results only then would we consider moving to the production phase of trading. We track our beta phase real time with live data using FxBlue, a well known and trusted independent third-party verification service. And when we move into the production phase we will begin tracking our performance on a real live account in FxBlue. 

Since the systems core strategy for providing Dow Jones trading signals doesn't include scalping but uses an intraday swing method of trading, trading the system on a demo platform gives us a realistic picture similar to trading a live account of what can be expected in the future with little material difference in the results when trading over the long term. But even more importantly, it depends more on the broker and the brokers data that can make a real difference in the results whether trading in a demo or live account.

 

The broker our system uses is ThinkMarkets based in London. More information is available on the Brokers menu tab or by visiting their website https://www.thinkmarkets.com/en/. They're unique in the sense that their demo server uses the same data from their live server. The system uses market orders to open trades so the demo fill prices for entries during the beta phase would be very similar to trading in a live account. Our VPS platform connection to our broker averages less than 1 ms and a clients account running on our trade copier's server which is setup to execute trades from the systems master account in less than 3 ms. In fact, after forward trading during our beta phase hundreds of trades on our master account the trades were copied and flawlessly executed on the clients account with positive slippage!

 

The degree of any slippage would depend only on the systems exit strategy. For example, if pending orders are being used to enter limit or stop orders or for stop loss or take profit price levels a demo account would not include slippage nor the impact of latency of the systems connection with its broker. Therefore, only the exits if pending orders are used, e.g. stop loss and take profit would be different since the demo account doesn't include slippage on pending orders. Since slippage on pending orders for a live account can be both positive and negative, when tracked over a long period of time we have found this variance not to be material. Trading the indices with ThinkMarkets there are no commissions and the spread is fixed at a very low 1.20 points during normal trading hours that the system trades. We conservatively use two (2) point spreads thats included in the backtesting results to help offset the affects from any net negative slippage on pending orders.

Another point of contention is the size and the amount the trader should have of his own funds invested to trade along side his clients. Though we agree mostly with this premise since its both comforting and assuring to a perspective client, there is no proven correlation that this is a requirement for success. The only proven indicator of future performance whether its a manual or an automated system is having a verifiable track record of success trading a real live or demo account for a minimum period of four (4) months and the statistical analysis that supports how a trader or trading system manages risk and if the system is profitable. This can be validated by the size of the drawdowns vs. the ROI, the size and average amount of losses and gains per trade, average time duration of trades, profit factor, etc...For a complete and extensive analysis of the systems performance we use FxBlue tracking tools that is updated real time on their website that can be accessed by clicking on the charts on our performance tab.

 

In conclusion, since our automated core trading system is not a scalper system but an intraday swing trading system there is little difference in the results whether trading a demo or a real live account over the long term. It's up to each client whether they feel comfortable trading with our system based on the beta phase track record running on our demo account or prefers to wait until the system begins trading a live account after the beta phase has been completed at the end of August, 2021.

Please refer to our White Paper for further information to evaluate our trading strategy and why we believe in using an automated trading system vs. a manual system is better. In fact, most of the Institutions, Banks, Hedge Funds and Wall Street firms today are using automated trading systems based on their proprietary algorithms that now make up over 80% of the transactions traded on the major market exchanges around the world.