Comparing Live Trading & Demo Exchange
The demo exchange is a great way to test the logic of your strategies in a realistic environment. Coinrule's demo exchange is modelled on Binance and features the same coins.
However, at times you will find that demo exchange trades and live trades can lead to different outcomes.
While the logic behind the executions is the same both for demo and live, the main difference lies in the fact that slippage is not taken into account on the Demo exchange. This can lead to different outcomes.
Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. Slippage occurs when;
The requested trade size/volume is bigger than the current bids or offers available in the orderbook which causes the execution in the next bid/ask level(s). This usually occurs when trading a large amount with a low-volume trading asset.
The market moved very quickly. In this case, we can see a price of $10, decide to enter a trade, send the order, and by the time it executes (which can be in milliseconds) the price has moved to $10.1
This is not caused by a technical issue, but by the market/asset behaviour. At times the real world cannot be simulated entirely accurately.
The lack of slippage generally improves the returns of Demo rules. This effect is even more evident when the rule trades less liquid coins and takes profit with very small price
percentages. You can read more on the topic.
Also, at busy times, the conditions on demo rules may be checked less frequently by our system than live rules. That is intended to give priority to live trading strategies running on our servers.
What Does This Mean For You?
Demo rules are not intended to replicate precisely the results of live trading, but they provide a useful sandbox to test out the logic of the strategies and for checking at which point the rule would open and close trades. This provides useful insight into how to optimize your rule setup.
In most cases, trading results are similar when comparing live trading and demo trading. When trading assets with lower liquidity, slippage can be spotted when comparing demo rules to rules on the live exchange and finding different results or missing hits between them. The reason for these gaps is (almost) always slippage, which affects live trading and does not affect trading on the demo exchange.
This is something to be generally mindful of when trading low-volume assets.
Coinrule is also continuing to look into making the Demo Exchange even more realistic in a way that would take into account the effect of slippage.