Disliked{quote} I can't agree more. This is exactly what makes takes be aback when I see someone believing that a demo account can be an ideal way of practicing live trading. In my opinion, sue to issues like slippages in live trading, I think a demo account is better used for practicing various trading strategies, and perhaps getting to understand what moves what currency etc. Finally, I think brokers are ever delighted when they see a scalper.Ignored
I refer to the accountable cost metrics being discussed above (commission/spread/volume terms etc ) as "Considered Transaction Costs" (relative easy to quantify).
And the latency/slippage/execution type costs, as "Hidden" or "Unexpected Transaction Costs" The problem is that these cannot be accurately modeled in your broker Demo/Test data, since they are highly variable and Broker specific.
A recent Boston Technologies Blog by Anna Aratovskaya, quotes Rishi N Rang and his bookInside the Black Box,.. as follows..
" UTC/slippage accounts for more than half of all transaction cost combined. If you have already calculated your monthly Considered Cost, now double it - what percentage of your overall monthly profit and loss would that be?" ....
and goes on to comment on how difficult these costs are to model from demo/test data.
Institutional Transaction Cost Analysis has become a major focus in institutional trading.. and has exposed startling differences between different brokerage services.
I can only imagine what proper TCA would show if applied to Retail Brokers. LoL
Hope this of help.
