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I'm interested in testing my trading strategy using the Interactive Brokers API for Trader Workstation.

A demo account is provided to play with TWS for free, but if I fund a real account I will be provided with a paper trading account to use. I believe that the demo account uses simulated or old market data, whereas a paper-trading account will use real-time data.

Other than the delay in market data, are there any restrictions or limitations to using the TWS demo account compared to a paper-trading account?

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The demo account sends simulated data, not delayed data. It is unusable for just about anything except to see if your connections are working.

The paper account sends real time data if you subscribe to it and pay data fees. It has all the functionality of a real account except fills are simulated. I believe it's worst case fills as in you have to trade through your price.

Delayed data is unavailable through the API.

There is no built in way to test strategies, you have to write them somehow.

Try http://finance.groups.yahoo.com/group/TWSAPI/ for more info (join group required).

There's no real need to open an account to test strategies if you plan on using historical data. The only testing specifically to IB should be testing your API code.

There are some intricacies to IB's data you should be aware of. It is sampled and only sends updates a few times per second. You won't get 100% accurate data from them. There is only limited historical data available for download.

edit: Delayed data is now available http://interactivebrokers.github.io/tws-api/market_data_type.html

Yahoo group moved to https://groups.io/g/twsapi

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  • $\begingroup$ I would not call the sampled data coming from IB inaccurate. It surely does not reflect a complete market as IB does not target high or ultra high frequency trading strategies with its API. But the prices are accurate and especially at times, when many assets print 5-10 times as many trades and most data feeds start to have a hard time to catch up, IB's feed looks pretty stable. Of course I am not talking about the top of the cream feeds worth several thousand dollars a month, but that is not IB's league anyway. I think IB targets buy side discretionary and retail. $\endgroup$
    – Matt Wolf
    Aug 14, 2013 at 13:04
  • $\begingroup$ @MattWolf I didn't say 'innaccurate', just not 100%. I like it because it doesn't lag. I only mentioned it because it will be different from purchased data used for backtesting. It only really matters at the tick level anyway. $\endgroup$
    – brian
    Aug 15, 2013 at 14:50
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brian covered the main differences in the first post, but one additional difference is that you only get one personal paper trading account that is probably an individual non-FA (financial advisor) account (or perhaps vice-versa, you have a paper FA account but not an individual paper account).

In contrast there is an individual non-FA demo account (login edemo) AND also an FA (financial advisor) demo account (login fdemo). In addition there is also a portfolio margin demo account.

So if you want to test your IB API application against API behavior with both FA and non-FA accounts (and perhaps even portfolio margin), then the demo accounts can provide testing beyond what just one paper account makes possible.

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I want to add several points to the statements above.

  • Demo account does not allow to make transactions for some asset classes. It does not fill even MKT order for options.
  • I haven't checked, but I'm sure they do not simulate expiration procedures of futures and options.
  • As by default TWS restarts once a day, you will lose all transaction history every day, as well as your P&L. Similarly you lose it after each log off.

Using paper trading account allows you to trade as if it is real account.

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The primary difference is:

Trading permissions, market data subscriptions, base currency, and other account configurations are the same as specified for your regular account.

https://www.interactivebrokers.com/en/software/am/am/manageaccount/aboutpapertradingaccounts.html

The key here is trading permissions.

For example: if your Live Account has not been approved to trade futures, you will not be able to trade futures with your Paper Trading Account. Permissions are carried across from your Live Account to your Paper Trading Account.

However, all products are available in the Demo Account. Interactive Brokers (IB) track your activity in the Demo Account by associating it with the email address you enter each time to access the Demo Account (not the username and password you create during the application process, this gets you into your Paper Trading Account).

IB then check this activity to determine your trading experience with a product when you apply to have Trading Permissions upgraded.

Source: IB Rep over Chat

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