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What is a Virtual Market?

A virtual market is where a market exists for trading, but there is no real money involved.

It is more of a model than a simulation, because the players are the ones that drive the movements in the market.

This market can take multiple forms, but the most common is the market where traders (players) have customers that trade automatically on a price based on the current market price. Because the individual trader is subject to risk limits, he or she has to trade out of the positions given to them at a profit.

This involves interacting with other traders, either in the marketplace ('electronic broker') or by rquesting or quoting a price directly to another trader.

. In either case, it is a game of strategy and stealth and requires skill, real skill, to profit.

This skill is in judging the direction of the customer trades (which can be changed either manually or automatically), judging risk, sizing up the positions and view of the other traders and in some cases, bluffing. It is 'anticipating the anticipation'.

You will soon learn that the price movements in these virtual markets resembles those of the real market: They are all there - head and shoulders, double tops, pennants . and so you will will start to get an insight on the factors that really drive markets, and not just the forex market.

This will prove to be an enjoyable and enrishening learning curve!

What types of Virtual Markets are there?

There are several variations of virtual market:

The most competitive is King of Forex

How do I publicise a Hosted Virtual Market Session?

After setting up your network session and checking your IP address, you can publicise the event by using the Calendar or the forum , or both.

You need to display the following information in this format:

Starts at:08:00 GMT

Finishes at: 21:00 GMT today

Currency Pair: GBPUSD live

Pos Limit:10m

AutoTransact = on


port 2000

Administrator is: Cableboy

criteria: Max. P & L

loss limiter = on, USD 25,000

dealing conversations = on,(4)

Starts: The time the session starts. To unify the time, please enter this as GMT

Finishes at: The time the session finishes. To unify the time, please enter this as GMT

Currency Pair: The designated currency pair. XXX is a fictitious currency.

Pos Limit: The Position Limit of the session, in terms of base currency

AutoTransact = If "on", means that the mechanism where customer trades are introduced to the traders' position is on and therefore, a virtual market.

IP: This is the ip address of your PC. You find this by typing "myip" in your Internet browser. Note that if you have a local network (LAN), you will need to create a DMZ on your router. When you start TMNS, you will only see the local address, which is usualy 192.168.2.x. This is NOT your IP address!. This IP address is vital, so that traders can adjust their network section of their tm.ini file, so they can log on.

ServerName: If you are using a server name instead of an IP address, then you enter it here. (see this blog entry for details on how to set this up)

port 2000 This is the port number on the server. This is normally not changed.

Administrator is: This is the identity of the administrator of the session. It is also the ID on this forum

Max. P & L The criteria for winning the session. This is normally maximum profit/loss, but can be one of many criteria

loss limiter =This is optional and shows if the session features the loss limiter, which throws the trader out if the loss limit (defined here) is broken. This is used in 'last man standing' competitions.

dealing conversations = This is to tell if the session features conversational dealing. If off, the electronic broker and stop loss orders are the only way to transact business with the market.

How do stop loss orders work on the Virtual Market?

If you pause the session, you may set a stop loss and/or a limit order

This mechanism is very simple: You set one order. You cannot set entry orders, for example. There is a menu item under 'Network', called 'Set stop-loss orders'. This displays a dialog box which has a space for the stop-loss rate and a place fr the profit-take rate and a check box for both of them. This is for the full amount of your position. To enable the orders, click the 'Set Orders' button

The orders may be adjusted or cancelled at any time you are 'paused'. On resuming the session, the stop-loss orders are cancelled automatically

If your stop-loss order is triggered, the market price is dealt on at each price level until the whole amount is executed. If your profit-take is tiggered, the bid or offer remains 'active' (but not displayed on the electonic broker) and will be executed at the proce as long as there is demand to sell or buy at that price.

If one of your orders is executed, the other order is reduced by the amount done on execution. This normally means that the limit order is cancelled as the stop is executed.

In a market with no 'crawling support', the orders are 'buffered' with the server, until bids or offers become available

What is 'King of Forex'

King of Forex is a variation of the virtual forex market where a loss limit is set for all the traders. This means that if you hit the loss limit, you will be 'knocked out'. This process continues until the last trader still 'alive' is the winner

There is no time limit to the game. Usually, there will be a limited log on period, so that players cannot join late in the game.

There may be various set ups (virtual market, virtual live tracking, synthetic rates, etc), but normally AutoTransact will be running

The game may be made more challenging to advanced players by increasing the deal limit size to approach the position limit size, or by making the market more volatile by reducing the liquidity provided by the central bank

In any case, there can only be one ultimate King (or Queen) of Forex!

What do I have to do to make a profit (or avoid a loss)?

You have to buy low and sell high!

In a Virtual Market with Autotransact, you are given a Position Limit. This is a never exceed limit as to how many millions of the base currency (the left hand currency in a currency pair). In some sessions, you will be penalised for excess amounts, which could trigger a loss limit.

Everyone else has this same limit; the problem is that, the 'customers' can deal with you and take you over the limit - especially in a bear or bull market.

Therefore, you have to 'lose' the position (i.e. sell or buy the excess) before this happens. You can use the electronic broker or direct dealing to do this. If you put the order in the electronic broker, you 'telegraph' your intention, even though the rest of the market does not know it is you. If you call someone, they will try and read you; if they 'mark down' the price and you do not deal, they will read you as a seller. So you have to be decisive or stealthy - or both!

In a market with customer bias, the customers might all be the same way, but normally, you might find a fair balance of buyers and sellers that will give you profit.

One of the skills of a forex market maker is that by constantly quoting prices, they get a feel for exactly what is going on in the market. If they quote good spreads, they will get business on both sides of the quotes and they will be the first to know what is going on - and because market makers usually 'reciprocate' (quote good prices to each other), they can 'get calls out' to liquidate positions quickly.

In a 'King of Forex' competition, your strategy is to 'stuff' the others without getting 'stuffed' yourself. You have to try and force all your opponents into costly mistakes to eliminate them from the game to emerge as the 'last man standing'

If I am running a session on loss limits, how do I protect the robot?

You may want to run a King of Forex session with one or two robot traders. The problem is, how do you prevent the robots being locked out of the session?

The solution is to provide the robots with a big profit from the beginning of the session, by putting 2 favourable deals through the central bank

For example: The currency pair is EURUSD and the market rate is around 1.2500. Do a trade where the Central Bank buys 10 million at 1.3000 and a trade where the central bank sells 10 at 1.2000, both with the robot. This will put an instant $1,000,000 on the robot's p&l

Keep an eye on the development of P&L and 'top up' if necessary during the session

How do virtual and actual markets compare?

Have a look at this example and judge for yourself: actual vs. virtual markets

Is there an easier way to publicise the server settings?

Yes. The normal way is to ask the users to change the serverIP= entry in the network settings section of the tm.ini file.

However, you can set up a dynamic DNS fixer, so that if your users will only be using your server, they can place the name of your server in the ServerName= section.

This is explained in this Blog

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