I mentioned in my new strategy post that live demo testing would last for two weeks unless bugs popped up. Bugs did pop up… but only in my rush to get ready for Thanksgiving!
I sat in my office frantically trying to wrap up code before business hours ran out on the day before Thanksgiving. The plan was to unplug for the long weekend. And, I did. Emails went on autoresponder and, aside from one night binging on Netflix, I didn’t see a screen for 4 days.
Rushing while problem solving, and especially programming, almost never ends well. I would never push untested code changes onto on a live account. But since I figured the change was simple and it’s only a demo account, it’s not a big deal if I mess it up. There went 4 days of live market testing down the drain.
I’m testing my live demo on FXCM US. As most US traders are aware, the FIFO rules imposed on FX brokers can get pretty annoying. I noticed that a small handful of my orders were being rejected in a special circumstance.
Say that I’m in a long trade and place my take profit at 1.0550. Now say that the signal is so strong that not only should I exit long, but I should also go short at 1.0550.
Anyone in a normal market would place a limit order to sell double the open position at 1.0550. That would cause the long trade to exit and a new trade to open in the opposite direction.
FIFO rules prohibit this because I’m already long. My intended bug fix was to place a take profit order to exit. The order to go short would then remain hidden in the code until the long trade exits. Doing the order logic this way follows my original intent, but also complies with FIFO.
The buggy bug fix
Using my long and then going short example, my long sets a take profit and then the code was intended to send 1 limit order to go short. I forgot to tell the code that it had already sent that one order. Instead, the code sent duplicate orders on every single tick.
Position sizes of 1 microlot mushroomed into several standard lots. Needless to say, the profit and loss began to swing wildly. The massive jump in size also swamped the statistics that I was hoping to measure with the data gathered so far.
It’s easier to start a new demo account, which is what I’ve done as of 5 minutes ago. One upside to using a new demo account is that I can run the code on an account size that matches my intended live testing balance. I plan to test with $2,000 instead of the $50,000 in the first demo.
The first few days of trading
The first few days continued much in the same vein as in my original post. I’m looking forward to collecting data from the new demo account. You can expect to stay up to date on my progress if you’re a subscriber to my free newsletter.
How I picked my brokers
Using limit orders is extremely price sensitive. If you place a limit order to buy EURUSD at 1.0550, the price must exactly hit 1.0550 in order for that trade to execute.
One danger of trading on marked up spreads is that you don’t know whether the broker is widening the bid or the ask. If the interbank market quotes a 0.3 pip spread on EURUSD at 1.05480 x 1.05483 and the broker usually charges a 1.3 pip spread, then the broker can mark up the spread in several different ways.
- Add the 1 pip markup entirely to the ask. The price on your screen appears as 1.05480 x 1.05493
- Add the 1 pip markup entirely to the bid. The price on your screen appears as 1.05470 x 1.05483
- Split the 1 pip markup across the bid and the ask. The price on your screen might be as 1.05475 x 1.05488
I of course have no idea which way the broker marks up the spread. If they’re smart, they will price shade in order to earn extra income from the easy order flow. There’s always the risk that the markup could cause one of my orders to not get filled, even though the real interbank market actually touched that price.
I’m doing my demo test at FXCM for three reasons.
- Commission only trading. It’s a pure interbank feed, so I don’t have to worry about how spread markups affect my execution.
- The commissions are very fair for a retail trader. It works out to $60 per side per million, which is only double the commission that a small institutional trader would pay. Retail rading costs have fallen dramatically in the past few years.
- Seer is already plugged into FXCM
When it comes to trade live, I’m planning to trade a personal account at FXCM US and a second account denominated in euros for my Irish company, Dominari (the same one that owns QB Pro). Dominari’s trading will go through Pepperstone, which offers the same commission only setup but 1) charges even lower commissions in euros and 2) offers much higher leverage.