Things that are the same in demo and live
The prices and spreads you see, the commissions you are charged and the swaps you are credited or charged are the same in demo and in live accounts.
The fundamental difference between demo and live
On live accounts, trades gets executed on the market. On demo accounts, they don't.
Demo trading is like a video game you play on your computer. Everything you do in demo, stays in your computer and the price your request is the price you get.
When trading live, however, there might be a difference between the price your expect and the price you get. This difference is commonly called slippage.
Slippage can occur on live accounts both in the case of market orders and in the case of pending orders.
Slippage on market orders
When you place a market order from your Metatrader terminal, information about this order first has to reach our Metatrader server located in a London-based data center. Once the order has reached the Metatrader server, it gets sent to the market, that is, to our liquidity providers, and gets matched and executed. The time it takes for the order to travel from one computer to the other is commonly called latency.
The latency between a trader's terminal and our servers depends on the trader. The trader's Internet connection and the location of the computer hosting the Metatrader terminal will affect how long it takes for the market order to reach our servers.
Traders who wish to reduce latency between their Metatrader terminal and our servers, are welcome to subscribe to a VPS service hosted and X-connected to Darwinex at London Equinix LD4, the venue where Darwinex is X-connected to its liquidity providers.
The latency between our server and the market depends on us, the broker. Our Metatrader server is co-located with the servers of our liquidity providers in order to reduce this latency as much as possible. However, this latency not only depends on the distance between computers. The speed at which orders gets matched once they reach liquidity providers are also part of it. The better the prime broker's technology and the better the quality of liquidity providers, the higher the speed when matching orders. When volatility is high or when orders have a large volume, the matching process can take longer.
As you can conclude, it is currently impossible to completely eliminate latency. Sometimes, market prices WILL change between the moment the trader sends the market order from his or her terminal and the moment this order reaches the market, giving rise to slippage.
The slippage we measure is the one related to the latency between our server and the market as this is the slippage related to the latency we can control. We do not measure slippage related to the latency between the trader's Metatrader terminal and our server as it does not depend on us.
Slippage on pending orders
In the case of pending orders (stop loss, take profit, buy stop, sell stop, buy limit, sell limit), the flow of data is slighly different. Once set, pending orders will be stored on our servers, not on the trader's terminal. Therefore, latency between the trader's terminal and the broker's servers disappears from the equation. The only latency affecting pending orders is the latency between our server and the market.
Please note that trailing stops do NOT get stored on the broker's server but only in your Metatrader terminal and will stop working when the Metatrader terminal is shut down.
Situations in which it is more common for significant slippage to occur due to high volatility and low liquidity
- Around news releases it is very common for MT4/MT5 market orders and pending orders to experience slippage.
- During daily market rollover (21:00 - 21:05 UTC) and also around weekly market open and close, it is especially common for pending orders to get executed at a different price than the expected price.
Pending orders from Metatrader do NOT add liquidity to the market like limit order do so when using other trading platforms. Once they get stored on the MT4/MT5 servers and get triggered by a price, they behave like market orders and get executed at the price available on the market in the moment they reach the market. A pending order will get triggered by any price beyond the price level set by the trader and get executed at the available market price.
Other minor differences between demo and live
- Dividends on indices do get credited or charged on live accounts but not on demo accounts
- Daily and monthly MT4/MT5 statements get sent by email for live accounts but not for demo accounts