Consider The Spread Before Buying An EA!!!
So, I read a lot about the actual performance of an EA being sub-par as compared to the strategy tester results. Most of the time, when I look at the pretty screenshots of people's EAs and see this fantastic equity curve, I'll immediately look at the spread they used. You'll notice that most of the time it's 1, maybe even reaching as high as 10. Don't be fooled, these are NOT pips, they are POINTS. So that means, for me, when I see a 1, that means 0.1 pips...my lowest spread EURUSD is typically around 2 full pips, usually slightly higher. So how is an EA supposed to perform well when it's designed for fractions of pips, and most of us have much higher spreads (or low spreads but also commissions and such to pay out on a transaction).......it's not :(
When looking to buy an EA, I strongly suggest looking at the spread used by the developer in their tester results and comparing it to what you would normally have for your live account...this will have a direct impact on your profitability. And quite honestly, you will probably lose money hand over foot because many developers can only get a good equity curve by magically dropping the spread to 1 or 5 or 10 POINTS...otherwise their EAs fail miserably.
Before I realized this fact, I had EAs that were crazy good...I thought when I chose 5 that it was in pips. Then I found out it was actually in points, so I changed to 50, and BAM!!!!...blown accounts left and right. Any time I make my own EAs, I always use a spread of at least 30, usually 50. I've never ever gotten any sexy equity curves long term from that....but using realistic spreads is the least I can do for myself and my wallet.
So I ask buyers to beware of EAs using unrealistic spreads of 1 or even 10...remember, it's points, not pips. It's your money on the line, please don't waste it.
Hi Christopher
I am agree with you observation and a addition to your saying for buyers especially,don't buy any EA before to test it live on demo,these all shown results are just attractions,never reality and a lot more games and tricks can be applied that you will be find when on live trading ... so a saying to developers,plz let buyer a demo trial for limited time.
You don't have to request that from the developers. As far as I can tell, all the Market products, will work in demo mode for free in order to allow the user to test it!
Well there are a lot of other things that people don't realize besides the Spread i can tell you that.
For example did you realize that you have just discovered the tip of the ice berg ?
Well there are a lot of other things that people don't realize besides the Spread i can tell you that.
For example did you realize that you have just discovered the tip of the ice berg ?
Consider it a silent hint.
Keep going and maybe one day you will know exactly how deep.
What is the difference between spread and pips? Isn't that the same? If I can buy AUDUSD at 0.75609 and sell at 0.75571, spread is 30 whatever it is called, pips or points it is the last decimal. The difference you mean may not be there, but in the fact that most brokers have 5 digits prices, while others have 4 digits. By consequence, in the AUDUSD price above, same spread at a four digits broker will be 3 points (or pips), but 30 points (or pips) on a five digit broker, which effectively is confusing because most if not all EA sellers don't mention this.
But this is not the worse. Most misleading is that it is usually advertized to be working on such and such instrument. Like: "Hey my trend following robot worked well on USDJPY. Try it next week!". :D Even USDJPY has long periods of range, and running a 99 bucks trend detection algorythm on a possibly ranging market is not the wisest advice to receive.
I'm not actually aware of any "4 digit brokers" left. Although possibly they still exist.
Humans are creatures of habit. The whole concept of a "pip" is a hard one for people to shake.
Most code is written to be user friendly. That often means that the user settings are in pips and the code handles the conversion.
"Pip" will never be abandoned because it is a proper unit of measure which stands for "Percentage in Point", a percentage of a cent or 1/100th of a cent.
The only exception is the Yen, because a "yen" is much closer in value to the equivalent "cent" of other currencies.
EDIT: The point concept is only used mainly by MetaQuotes, In most other markets the "Point" is a "full unit" value and not a "fractional" value as used in MetaTrader.
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So, I read a lot about the actual performance of an EA being sub-par as compared to the strategy tester results. Most of the time, when I look at the pretty screenshots of people's EAs and see this fantastic equity curve, I'll immediately look at the spread they used. You'll notice that most of the time it's 1, maybe even reaching as high as 10. Don't be fooled, these are NOT pips, they are POINTS. So that means, for me, when I see a 1, that means 0.1 pips...my lowest spread EURUSD is typically around 2 full pips, usually slightly higher. So how is an EA supposed to perform well when it's designed for fractions of pips, and most of us have much higher spreads (or low spreads but also commissions and such to pay out on a transaction).......it's not :(
When looking to buy an EA, I strongly suggest looking at the spread used by the developer in their tester results and comparing it to what you would normally have for your live account...this will have a direct impact on your profitability. And quite honestly, you will probably lose money hand over foot because many developers can only get a good equity curve by magically dropping the spread to 1 or 5 or 10 POINTS...otherwise their EAs fail miserably.
Before I realized this fact, I had EAs that were crazy good...I thought when I chose 5 that it was in pips. Then I found out it was actually in points, so I changed to 50, and BAM!!!!...blown accounts left and right. Any time I make my own EAs, I always use a spread of at least 30, usually 50. I've never ever gotten any sexy equity curves long term from that....but using realistic spreads is the least I can do for myself and my wallet.
So I ask buyers to beware of EAs using unrealistic spreads of 1 or even 10...remember, it's points, not pips. It's your money on the line, please don't waste it.