Discussion of the Forex Contest FXCM Forex Contest

SCGroup posted:
Its just game or joke ....we also have that ECN ARBITRAGE EA But it s not working in real and its wrong contest

SCGroup posted:
Only One Question To FXCM
the ARBITRAGE EA allowed to me For Use IN LIVE account ?????????????

Hi SCGroup,

I'm not familiar with the particular EA to which you are referring, so I cannot comment on it specifically. That said, I would like to direct your attention to the following statements from the contest rules page:

'Please note that demo accounts are based on simulated conditions. Though MetaTrader 4 demo accounts attempt to replicate real-time market scenarios, there are key differences that distinguish it from a live account; including, but not limited to, the lack of dependence on real-time market liquidity.'

Simply put, that means that demo accounts have inherent limitations in that there is no way to replicate the liquidity available in the real market or lack thereof at any given time.

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


1. How realistic are the trade sizes you are using?

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. For example, 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.


2. What percentage of your equity did you risk on your demo trades?

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.


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

Investopedia.com defines 'liquidity' as follows: '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.'

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: https://bit.ly/P6lUzX

* 73% of all orders had no slippage.
* 15% of all orders received positive slippage.
* 12% of all orders received negative slippage.
* Over 60% of all limit and limit entry orders received positive slippage.
* 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, FXCM's Trading Station platform 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 your negative slippage. You're still able to benefit from any positive slippage even if it's greater than 3 pips.

FXCM has similarly enhanced the Maximum Deviation feature on our MT4 platform. While other MT4 brokers may limit both your positive and negative slippage equally based on your Maximum Deviation setting, FXCM's MT4 platform is unique in that our Maximum Deviation only limits your negative slippage while still allowing you to receive the full benefits of any positive slippage that's available.