Why Not to Trust Scalping Expert Advisors You Find Online
First of all it is important to get high quality historical data in order to backtest the strategy you are going to buy before using it with real money.
Despite going against my personal interest, I would like to underline the following consideration about scalping expert advisors.
The Problem with Scalping Backtests
It is usual to see exponential growing equity charts as a result of a scalping expert advisor. Probably the backtest has really been run — but they almost certainly did not take into consideration spread and slippage.
The Spread Problem
The spread is the difference between bid and ask prices. This can be a disaster for a scalping expert advisor, because operations are so frequent that they do not earn enough to cover the spread.
In this example the spread is not fixed — it changes daily. The light blue line is the average spread level. For a scalper making tens or hundreds of trades per day, even a few extra pips of spread per trade compounds into a devastating cost.
The Slippage Problem
Furthermore we have to take into account the imperfections of the market — first of all, slippage.
Slippage is a range of prices you accept when trying to buy or sell a future or any kind of stock. For example, if you are going to buy an ounce of gold for $1,100, you can set the slippage to 30 points (3 pips) and accept a buy order at $1,100.30.
It is quite common not to be able to fill exactly at your target price. The same happens for sells. This imperfection is not much important for a day trader or a long-term trader, but it is critical for scalping.
The Bottom Line
Almost all expert advisors you find on the web promising to earn 300% in a month easily do not take into account spread and slippage.
Trust me: these two factors can turn a highly profitable backtest into a complete waste of time and money. Pay attention.
This is why at BacktestMarket we:
- Always backtest with a wider spread than the broker actually applies
- Always add a slippage margin to every simulation
- Never recommend scalping strategies for automated trading systems
If a strategy only works on the assumption of zero spread and perfect fills, it has no edge in the real market.