IB execution on live versus paper trade

tommcginnis · Jun 24, 2008

I am thinking of returning to the relative safety of scalping, and while re-tuning my methods, I *seem* to have noticed that the IB paper trade engine provides hits on orders (long or short) more quickly than the live account.

Maybe this is a question for IB staff only, but is there any sort of priority or standing difference between the paper trade account and a live account? Both situations use SMART routing. Same instruments. It could be just different days' volume or increment away from bid/ask... but if there were any (ANY) sort of execution difference -- and I'm speaking of speed of getting into and out of a position as soon as the market APPEARS to be there -- that'd be vital to know before I start moving money around.

And "I don't know" is NOT a bad answer. Lots better than a blow-off.

cunparis · Jun 24, 2008

Quote from tommcginnis:

I am thinking of returning to the relative safety of scalping, and while re-tuning my methods, I *seem* to have noticed that the IB paper trade engine provides hits on orders (long or short) more quickly than the live account.

Maybe this is a question for IB staff only, but is there any sort of priority or standing difference between the paper trade account and a live account? Both situations use SMART routing. Same instruments. It could be just different days' volume or increment away from bid/ask... but if there were any (ANY) sort of execution difference -- and I'm speaking of speed of getting into and out of a position as soon as the market APPEARS to be there -- that'd be vital to know before I start moving money around.

And "I don't know" is NOT a bad answer. Lots better than a blow-off.

Today I couldn't get a fill at all with the sim account. I was bummed, I had 5 stocks that I could sell. All I could do was watch them go down. Very strange.

It's almost worth $1 to trade 1 share with my real account..

nassau · Jun 24, 2008

I have several traders who are presently using the simulated and real account together. There really isn't much difference a few cents which can be as a result of the internet (band width), available shares etc. although last while the simulated account would freeze and then shut down. This happened several times thoughout the day. The live accounts did not have this issue.
A few of the traders use the sim to practice and too help set up their live trades.
It also will depend on what style of trading you do as a few cents here should not make or break the trade.

w

tommcginnis · Jun 24, 2008

Quote from cunparis:

Today I couldn't get a fill at all with the sim account. I was bummed, I had 5 stocks that I could sell. All I could do was watch them go down. Very strange.

It's almost worth $1 to trade 1 share with my real account..

Yeah, I've seen that, too, but managed to develop "work-arounds" that allowed me to set up for live trading w/o issues. So far.

But btw, make sure you have the LAST price on your trading page along with the BID and ASK, as sometimes (*often* in a slowish day) the market will move right past bid and ask without a take of any kind. Having LAST and an eye on volume can insure that you're looking at the right stuff. Time&Sales may help prove activity too.

tommcginnis · Jun 24, 2008

Quote from nassau:

It also will depend on what style of trading you do as a few cents here should not make or break the trade.

w

As I'm scalping, "a few cents" IS the trade. What's more, if the trade is not hit and the market moves away from me, I've not only missed the dime I was seeking, I'm now hanging with my arse in the wind for perhaps another dime. {Read, "Holy Shieze! Not Again!!"}

So the question remains, is there any difference in whether a trade is hit {based on book, or something else?} in the paper trade versus the live account?

Reliably milling $200-$400/hour in the paper account does no good if it does not translate to similar hits on the live account. Scary. Major skin in the game.

Anyone have the answer?

larrybf · Jun 24, 2008

I DO NOT TRUST IB SIM TRADING OR ANY SIM TRADING FOR THAT MATTER... BEST ADVICE........ TRADE SMALL SIZE WITH REAL $$$$.....there is no other way to truly find out

kubilai · Jun 25, 2008

Are you trading small sizes of very liquid stocks? If so IB's paper account does a good simulation of live trading.

If your size is large relative to liquidity, then paper trading is a poor substitute, for these reasons:

- your limit orders push the market away in live trading, not in paper trading

- paper account assumes you get all the liquidity trading at or above your limit price, this doesn't happen in live trading

And the biggest problem regardless: there's no emotional involvement with paper trading.

tommcginnis · Jun 25, 2008

Quote from kubilai:

Are you trading small sizes of very liquid stocks? If so IB's paper account does a good simulation of live trading.

If your size is large relative to liquidity, then paper trading is a poor substitute, for these reasons:

- your limit orders push the market away in live trading, not in paper trading

- paper account assumes you get all the liquidity trading at or above your limit price, this doesn't happen in live trading

And the biggest problem regardless: there's no emotional involvement with paper trading.

Small sizes? Liquid stocks? Ouch! Those relative terms... I'm in for between 100 and 500 shares, in stocks that trade between 1M and 6?M daily. That Q allows me to scale into positions to improve an average price, but to jump out (all 500 in the trade) *usually* with 1 hit, sometimes 2 "partials." Average per hour numbers are something like 15-20 trades, 1000-1500 shares, 2:00-3:00 per trade, $5-$25 per trade cleared, 95% positive trades.

I am trading $0.03 inside the bid and ask for most stocks (some stocks I will reset to inside bid and ask by a penny). This shows up as changes in the bid and ask in the paper account -- an effect I rarely see, come to think of it, trading live).

"- paper account assumes you get all the liquidity trading at or above your limit price, this doesn't happen in live trading" Forgive my blockheadedness, but could you restate this? You're either answering my question so clearly I'm missing it, or you're reposing the question. Either way, you've hit upon the real issue (*I* think). So, "Whatcha mean?"

AND THANKS.

tommcginnis · Jun 25, 2008

Quote from tommcginnis:

"- paper account assumes you get all the liquidity trading at or above your limit price, this doesn't happen in live trading" Forgive my blockheadedness, but could you restate this? You're either answering my question so clearly I'm missing it, or you're reposing the question. Either way, you've hit upon the real issue (*I* think). So, "Whatcha mean?"
AND THANKS.

I think I've got it: you mean that the IB paper trade clearing mechanism allots 100% of the market demand (which is at or beyond your LMT price) to your trade, which "doesn't happen in live trading". As you might guess, this is what I fear, but do you KNOW this to be true? I didn't say so before, but this is the kernal of my question, e.g., is the allocation mechanism the same? If not, how is it different?

Can anyone from IB step in? Anyone with direct knowledge? Do you, kubilai, have direct knowledge?

(Thanks so much, to all respondents.)

kubilai · Jun 25, 2008

I don't have direct knowledge. I just trade small stocks and do relatively large volume, so it has always looked to me to assign all the prints...as they come in...to my order. In live trading, your order can be posted on any number of exchanges, and the demand for these shares don't necessarily hit your order. There's also time priority.

At your relative volume, I think paper trading is about the same as live trading.