Expert Advisors Reviews
Review of Million Dollar Pips Robot: Demo vs Real Account Performance
Some of you must be getting sick and tired of our latest reviews of expert advisors (EAs) that concentrate on forex robots using gambling techniques. Well, today we're taking a step aside from the gambling field – that's right – all the bets are off.
Instead we take a closer look at an issue which must be bugging every trader once in a while – the differences in performance of a robot on a demo account and a real account.
As you know, the demo accounts are practice ones, they do not involve any investment with actual money. On the other hand, the real accounts mean that you get to earn and lose real money, and, unfortunately, sometimes you get affected by slippage and requotes.
We'll attack the problem by comparing the performance of a very popular EA – the Million Dollar Pips (MDP) robot, on a demo and a real account.
Scalping pip by pip
Before starting to trade with the MDP, you need to buy it – it costs $99, and in case you happen to hate it after as many as 30 days, you are set for a full refund.
MDP is an extreme scalper – we have already discussed scalpers when we reviewed theShark EA – a scalper is a software program that opens a number of trades simultaneously and keeps them open for a very brief time interval with the aim to benefit from small market movements.
When I said that MDP is an extreme scalper, I meant that it opens a large number of trades – sometimes 10 or so, simultaneously, and closes them seconds after the opening.
This is a very active, impulse scalper – it awaits for swift changes in prices and enters trading in the same direction.
Real Dangers for Scalpers
Now that you know what sort of a strategy MDP uses, you can foresee some of the problems this EA will experience once it has to work on a real account instead of a demo.
The first problem is what I like to call “Slip to Death” - the problem of slippage - the price difference between order and execution. This happens once in a while even with most decent brokers, but bandit brokers can scalp your account piece by piece with frequent slippage. Since this bot, as any other scalper, relies on profits from small price changes, even a brief delay may destroy the trading.
Then, there is the problem of spreads – even a spread of a couple of pips may cost a lot when the bot makes profit of a few pips per trade. In addition, do not be enthusiastic of testing this bot on an ECN account, since commissions apply in this case. I'm not saying not to use a scalper on an ECN account, but please choose the broker wisely with regards to commissions.
Unfortunately, there are more factors that can kill MDP trading on a real account and among them is high latency. Latency is the time needed to pass the order request to the broker's servers – low latency is good, but high latency can ruin trading with a scalper for which speed of trade execution is crucial. And when it comes to latency, even geographical factors are vital – if you or your VPS are located far away from the broker's servers, this may increase chances of high latency. If you opt for a scalper trading on real account, contact your broker and ask about the servers' location: there's nothing scary about being annoying when it comes to your money!
MDP's Performance: Demo vs Real
The developers of MDP have a demo account on Myfxbook.com, while a third party has areal account to which it has also applied the robot. Both accounts are with ThinkForex and trade EURUSD solely. The demo account has been active for a longer time – since May 5, 2011, while the real account has been active since Jan 18, 2012.
Since Jan 18, 2012, the robot has generated a gain of 58% for the demo account, while the real account has incurred a loss of 34%: pretty remarkable difference, isn't it? The difference is particularly stunning, if we take into account that the broker is the same. This is the living proof that the dangers that we enlisted above may hit a real account for whose well-being a scalper is responsible.
The history of trades of both accounts illustrates the scalping strategy of the EA – average pips per trade are less than 2, trades are held open for less than a minute on average and numerous trades are opened at the same time.
The detailed history also points to some peculiar differences: the chains of losses, for example, happen on the same days for both accounts, but the sequences are longer for the real account than for the demo account. For example, on April 3, 2012, the robot opened 20 trades in the real account, of which 18 were losing, and 2 -winning. In contrast, the robot opened 12 positions in the demo account: 11 were losing and 1 was winning. Such discrepancies can be blamed on differences in price feeds or on different settings of the EA.
Demo Street Fighter
Manual traders cannot scalp – they are not disciplined, efficient and fast enough to do it. But forex robots, like Million Dollar Pips, can do it and they do it well. In this respect scalpers resemble street fighters – they just keep beating until the enemy gives in.
The only problem is that this street fighter is a demo one – in discussion forums it is also known as the Million DEMO Pips. Don't use it if you'd like to purchase something real with the demo pips it wins for you.
Know Your Keywords
Expert advisor (EA) – An algorithmic trading system for the MetaTrader platform; a trading robot. EA’s can either be downloaded free of charge or for a fee, or can be programmed in the MQL programming language.
Drawdown - A trader's biggest loss for a certain period of time, expressed either in pips or as a percentage of the trader's profit. The lower the drawdown percentage, the less riskier the trading strategy.
Let's say you start with a balance of $1,000, then make a profit of $1,000, and after that lose $500. Your drawdown will be 25% ($500/ $1000 + $1000 = 0.25 = 25%).
Backtesting – Testing a trading strategy on past time periods through a simulation.
Lot - The standardized contract size of a trading instrument. A standard lot consists of 100,000 currency units, a mini lot – of 10,000; a micro lot – of 1,000 units, and a nano lot – of 100 units.
If you are buying 1 lot EURUSD at 1.3000 for example, you are buying 100,000 Euro for 130,000 US Dollars.
Pip - The fourth digit after the decimal sign of a price quote. For example: if the EUR/USD moves from 1.3350 to 1.3351, that is one pip. Pips are used to measure price movement, profit and slippage.
Scalping – Opening numerous short-term or high frequency trades for the purpose for making profit off small market movements. A scalper can make 10 to a few hundred trades per day, aiming at realizing very small (let’s say 2-3 pips) profit off each trade.
