Spread and demo account Forex with IG

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  • 12/14/2022 at 6:48 PM #205754
    ZeroCafeine

    hello every one,

    on EUR/USD in demo account with IG, I open a position with a limit order and close the position with a limit order a few minutes later at the same entry and exit price, why don’t I pay a spread in the demo account?

    Example I bought at the price of 0,85960£ and I resold at the same price, that makes me 0£ until there all is normal, but why I did not pay of spread?

    Best Reguards
    ZeroCafeine

    12/14/2022 at 7:14 PM #205764
    GraHal

    What value for Spread have you set in the backtest engine … presumably 0?

    See on the right hand side (of the backtest code editing window) and locate a box names spread, enter a value appropriate for the Instrument you are backtesting on.

    Let us know  if you cant find the spread setting and I’ll do you a screenshot.

    1 user thanked author for this post.
    avatar ZeroCafeine
    12/15/2022 at 1:02 AM #205771
    ZeroCafeine

    Hello @Grahal

    Tks for your answer, but it’s not a backtest ( I know in backtest setting I have to choose the spread), it’s real trade but in the demo account (not the real account)

    So opened a trade with a limite order and after some time I made an order to close it with the same entry price

     

    Normally I have about 1 pip for opening and 1 pip for closing so 2 pips (Mini Lot), I made 2 trade so I have normally about 4 pips of fees (as spread), but nothing, the equity of my account still the same

    12/15/2022 at 9:21 AM #205779
    GraHal
    ZeroCafeine wrote:

    close it with the same entry price

    So that is what you got … the spread was built in / talen account of … but resulted in you closing with the same entry price.

    To use a simple example with a spread of 2 …

    1.  Long trade opens at price = 10 (Sell price at that point = 8).
    2. Strategy waits until price rises 2 points = 10 then exits (Sell price at that point =10).

     

    From your screenshot, above appears to be the scenario?

    Or do you mean … you cannot see the spread being taken at entry (spread = 2/2 = 1) and at exit (spread=2/2=1)?   Where do we normally see spread being taken by broker … I can’t recall?

    1 user thanked author for this post.
    avatar ZeroCafeine
    12/15/2022 at 10:06 AM #205783
    ZeroCafeine

    Tks you Grahal for your light, if the spread is 2 Pips for exemple, So when :

    – I enter Long for 0,85960£, it’s like I bought at 0,8594 (0,85960£ = 0,8594 + 0,0002 of IG fees)

    – when I exit form my long at 0,85960£, the one who bought my position he paid 0,85960£ + 0,0002 = 0,85980£

    That’s correct?

    12/15/2022 at 10:15 AM #205785
    GraHal

    As you describe above is more like what happens on ‘normal exchange trades’

    Our Accounts / deals  are with IG and it is IG that are on the other side of the trade.

    So IG take half the spread on entry and half the spread on exit.

    12/15/2022 at 11:48 AM #205808
    PeterSt
    GraHal wrote:

    So IG take half the spread on entry and half the spread on exit.

    I would be careful with that, unless you can -somehow- prove that this is true. Notice the importance, because *or* you see your (spread-)money gone right after the order has been filled, *or* you see half of it gone, *or* you see nothing of it gone (yet).
    The importance of the correctness shows when your autotrading program compares the current profit with what the system thinks of it (the system = PRT and PRT does not count the spread within your program). Read : when you don’t have this right, you may not have a profitable trade, while you(r program) thinks it has and exits.

    Anyway … the process at work is quite different from what most of us think and this relates to how Limit orders work. I am observing the practice of this continuously and I am still not able to definitely tell how it works. But … I am on the track of IG taking the spread sometimes twice via very sneaky means. A better and more nice expression would be : If you ask me, I’d say for this moment that the program code from IG herself is buggy. Of course this is way complex to begin with (at least that is what I envision) but I see thinks happening which IMHO can’t bear the daylight. And CFD’s eh … you know …

    Disclaimer (kind of) : With Limit orders we can never know WHO grabs our position which can be e.g. you, or can be IG herself. IG needs to hedge everything (this is related to CFD as far as my understanding goes) and they may utilize my position for a hedge elsewhere. This also means that I may initially gain on the entry (a Long is taken for a too low price) which I then somewhere along the lines must lose again. This should be at the Exit, where the other way around happens (may happen). I would observe this as spread taken, but this is not how it shows physically. Physically my order goes out without the price ever being touched (which can happen in reality in very normal fashion). Net it should balance out to “the spread”.
    I should make a video of the both ticklists you see below, where the left hand one is IB, the right hand IG. IB is the truth, IG is CFD. The CFD list is continuously moving and I think I can tell you that IG does not pass much more orders than IB. But IG deals (figurative and literally) with herself much more, for example when they “need me”.

    1 user thanked author for this post.
    avatar ZeroCafeine
    12/15/2022 at 4:52 PM #205831
    ZeroCafeine

    hi @PeterSt

    Thank you for your answer,

    without going into too much detail about what is happening on the IG side because it is another problem, I would have liked to find a simple explanation to my problem,

    I called the IG sales department this morning, I recorded the call in French and I will listen to it again later with a colleague, the person I spoke to on the phone was not very sure of his explanations about Spread, I think that he rarely receives annoying questions like mine

    Best Reguards,
    ZeroCafeine.

    12/15/2022 at 6:09 PM #205832
    PeterSt

    Assumed I understood your issue correctly :

    The other answer is that PRT does not register the spread for Fx with BackTesting. I announced this issue to PRT support 5 years ago, say each year thereafter another time, but as so often nothing gets solved. For GraHal : it is even in our Spreadsheet with things to solve for PRT, which spreadsheet and more data has been handed to PRT three time. Yes, 3.
    I now definitely gave up on pursuing it.

    See below for what is acceptable (0.8 pips).
    All you do with an investment of say 100K, is see that for example 50 trades occurred during your backtest, which adds 100 times (thus in and out) ~80 USD (2nd half of the pair) or USD 8000.

    If I recall correctly the real spread for IG is 0.6 during “hot hours” and 0.9 outside of that, with excursions to 1.5 – 2.5 when all is really slow (past our midnight or so).  I must look back in emails what IG officially counts as the average they use for real (measured), but I recall it is somewhere in the 07’s. I thus always calculate with 0.8.

    Thus : E.g. 50 trades where PRT shows a profit of 7500 (well done) and deduct 8000 for spread (hmm).

    Regards,
    Peter

     

    EDIT : I said Backtesting, but just have it “Live” in Demo incurs for the same problem (with the same solution, thinking of the long term (50 orders and such)).

    1 user thanked author for this post.
    avatar ZeroCafeine
    12/15/2022 at 6:28 PM #205834
    GraHal
    PeterSt wrote:

    deduct 8000 for spread (hmm).

    I take it you mean deduct 80 for spread (50 trades so 100 in and out = 80?)

    12/16/2022 at 5:34 AM #205854
    PeterSt

    50 x 2 x 80 = 8000

    12/16/2022 at 7:20 AM #205855
    PeterSt

    Almost 90 minutes later, trying to make a better explanatory post (which I ran stuck with), I better abbreviate all to :

    The 80 I took from my own system accordingly, uses 2M of position amount and not the 100K I suggested (that suggestion made no sense). Thus the 80 should be 40. Now

    50 (orders) x 2 (in and out) x 40 (amount payed per order) = 4000 for 1 million.

    On top of this there’s a whole pile of issue and I can’t judge (by now not any more) what ZeroCafeine actually runs into. The way I solve things myself is inordinate and it comprises indeed of deducting the spread yourself. But this can only be done in certain places (certain reports which do not incorporate it) and the danger emerges easily that you will deduct the spread twice. Backtesting requires a different solution than Demo-Live and it is easy do do things wrongly / make mistakes.

    The (or my) whole shebang emerges from IB working with Commission (not spread) so the base for your program code needs to anticipate that when working with both IG and IB (which is my situation). Anyway, this is how/why I mention “x 2 (in and out)” also knowing that one can use the Order Fee field BUT calculate the spread yourself internally. This is the part where my explanations run stuck (too much involved). What remains is that the Live-Demo does nothing with the Order Fee (Commission) while I by now may wonder what would be wrong with the usage of Spread. I think … nothing. This is because it is just eaten from the gain.

    So @ZeroCafeine, could you once again tell us what you actually don’t see working ? I think I already said that I am unsure about your issue. And Yes, it is all really confusing because something surely *is* lacking. The question would be whether this can really bother us when using Spread (we can’t do otherwise with IG).

    12/16/2022 at 9:21 AM #205865
    GraHal
    PeterSt wrote:

    50 x 2 x 80 = 8000

    You had stated (in 2 posts preceeding above) that the spread was 0.8 (not spread = 2)

    PeterSt wrote:

    50 (orders) x 2 (in and out) x 40 (amount payed per order) = 4000 for 1 million.

    What is 40 (amount payed per order) in addition to spread = 50 (orders) x 2?

    12/16/2022 at 10:06 AM #205866
    ZeroCafeine

    Thank you very much for taking the time to reply, it’s always interesting to discuss and debate,

    As far as I’m concerned, in general, when I ask myself questions about something and I’m looking for answers, then for me to understand it properly I have to be able to explain it to a 10 year old.

    So here is my problem again:
    I have a sum of 10€, I buy some 2€ and then I sell it for the same price of 2€, normally IG should charge me 2 x 0,02€ = 0,04€.

    So I should be at 10€ – 0,04€ = 9,96€

    The problem is that my account hasn’t changed and I’m still at 10€.

    So here’s my explanation for the 10 year old in me:

    When you buy something for €2 then you’re actually buying for €1.98 + €0.02 (IG fees), so 10-2 = €8

    And when you resell at €2 then you are really reselling at €1.98 + €0.02 (IG fees) €8 + €2 = €10

    So the operation looks transparent like this

    If you have other explanations then they are welcome,

    And yes I agree with you on the fact of charging 2 times the way there and back, if I buy something it’s because someone else is selling it on the other side of the counter and so the fees are charged twice when buying and twice when selling (normally not the case with CFDs)

    At IB the spread is fixed and you pay commission? What about micro lots on forex?

    The day I really want to do backtesting then I’ll have to put in huge fees and really punishing conditions and see if my backtesting comes through anyway otherwise it’s not worth it,

     

    I’ve already had experience with backtests where I came out with a stop loss in the middle of a Gap, which made me understand the inaccuracy of backtest

     

    Best regards

     

     

    12/16/2022 at 10:31 AM #205867
    PeterSt

    Hmm … I don’t know what you try to make of it, but …

    Spread = 2 ??
    No, Orders are 2. One In, one Out.

    Spread = 0.8 (average) for Fx important pair.

    Spread payed for 1 million is ~80.

    When (Backtest-) arranged by means of Commission, it is $40 per order = In + Out $80 again.

    The 50 x 2 x 80 was wrong because based om 2M (I copied from my screen and forgot the importance of the amount). Thus that should have been :
    50 x 2 x 40 = 4000 for positions of 1 million.

    50 times taking a position of 1 million and exit it, will cost around USD 4000 (for EUR/USD).
    1 time costs USD 80 (at a spread of 0.8 pips).

    The number of times come into play when you look at the Live-Demo result and want to know the real Gain, because the cost for Commission is not included.
    And here all gets vague because it is about Spread and I think the spread is automatically included in the Live-Demo result. I think that possibly ZeroCafeine goes off track here :

    ZeroCafeine wrote:

    on EUR/USD in demo account with IG, I open a position with a limit order and close the position with a limit order a few minutes later at the same entry and exit price, why don’t I pay a spread in the demo account?

    The harder part of this is how the Limit order is taken. I should partly refer to my first post in this topic. But now I better understand the issue – at least that is what I hope – this would be my answer to the quote above :

    Best is to closely watch how the Limit order executes when you compare a situation with fixed low spread and fixed high spread. With “fixed” I mean that IG lists what it exactly will be at what periods of time (like for Indexes). You can then see how a spread of e.g. 5 points (think Nasdaq) leads to the order being filled way above or under the price, namely at the 5 point limit. Notice that you must watch this process live or else it is too difficult to understand. Anyway, this is to be compared with the low spread of e.g. 2 points. Just look at that period of time where the spread is low, but try to watch at not-so volatile times. Now, in the case of low spread you will see the order being filled at 2 points of distance – a significant difference with the 5 points situation and easy to see.

    What you think you see without knowing about the above, is a same entry and exit price. Just like ZeroCafeine says. But what you then missed is the moment where the order was filled, which is lower (for Long) then what the fill-price tells you. Thus, see the small example below. Current price is 11230.9. Spread is 2 points. Suppose your Limit-Long order is set at a price of 11229.9. Now the price drops to 11229.9 and nothing happens (this could be quite new to some). 11228.9 and still nothing happens. Then it drops to under 11227.9 – goes up through that 11227.9 again, and at *that* moment the order is filled. Yes, with a registration of 11229.9. You won’t complain because all shows exactly as planned – your Limit order at 11229.9 is filled at exactly that price.
    … Meanwhile you lost the price of 2 points because the order was really filled at 11227.9…

    This works so in Demo and this works so in Live. This also works so in Backtest, but in Backtest you can only see it when you graph all yourself (which is what I do) because the Limit order (with its Price line) won’t show on the screen.

    Lastly, when this is clear  a bit now, you can re-read my first post and now see how this “spread taking” can be manipulated from taken at the entry, taken at the exit, or both and at that with a division which is up to the broker. The Entries are usually clear to see. The Exits are often strange because (without real proof) visually the price is not even touched but the order goes out (notice that this is always about trades with profit).

     

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