When you say small, you mean 1 contract? A week?
Advice on paper trading....
- Thread starter ADONAI1ST
- Start date
When you say small, you mean 1 contract? A week?
When you say small, you mean 1 contract? A week?
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It will depend on your trading capital, experience, tolerance for risk, etc. The basic theme is aspiring traders typically will size way larger than experienced traders. When you size down it takes out a lot of the fear/greed factor. What is small - For learning I would say keeping your loss per trade no larger than 0.5% of your capital is what I would suggest since you asked. Your better off starting out on the Index ETFs like SPY/QQQ/IWM, you can size down this way and it gives you the experience you will need. With any luck you will trade up long and far enough before taking on the futures markets - this way you have a bit of an edge going into futures.
1 contract is not small, look at the daily $ range on the ES. How do I size trades: I never take on more than 1 ES/CL/GC/etc contract per $100k and will not take a loss greater than 1% max of my capital on any trade. This is a common formula used by many veteran swing traders. When I size down I cut that in half or less risking no more than 0.5% of capital on trades.
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It will depend on your trading capital, experience, tolerance for risk, etc. The basic theme is aspiring traders typically will size way larger than experienced traders. When you size down it takes out a lot of the fear/greed factor. What is small - For learning I would say keeping your loss per trade no larger than 0.5% of your capital is what I would suggest since you asked. Your better off starting out on the Index ETFs like SPY/QQQ/IWM, you can size down this way and it gives you the experience you will need. With any luck you will trade up long and far enough before taking on the futures markets - this way you have a bit of an edge going into futures.
1 contract is not small, look at the daily $ range on the ES. How do I size trades: I never take on more than 1 ES/CL/GC/etc contract per $100k and will not take a loss greater than 1% max of my capital on any trade. This is a common formula used by many veteran swing traders. When I size down I cut that in half or less risking no more than 0.5% of capital on trades.
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I must say I don't understand that chart. I see huge swing day to day but not so much on the 20. Could I even trade that with a $5,0000 account?
So you suggest that someone who has no experience in trading whatsoever, just go into the market live for the very first trade and work it from there? Fascinating concept.
I LIKE this idea! Let's all suggest this, in fact, to every other person out there we know who may wish to learn trading, and bring liquidity to our markets! YES!
GENIUS CALL HERE! So when they blow out their accounts in 3 days, that will REALLY be helping to add liquidity to the markets, when they are blown out and gone and done. Yeah. Brilliant.
Yes absolutely. I am not suggesting they put a lot of money in at first, but the trades should be made with real money.
People who think they are going to paper trade to a great system are losers.
That is the best advice you have ever received.
You sound like a Cleveland Browns fan.
I got a 78% return in 2016. What did you do?
Can you give me a little more info on why you believe this? How can one do this and not kill their account? Would you say it best to maybe paper trade, then make a real trade, then go back and see why you lost on paper?
The whole point of taking a few real trades is really to test yourself. Of course having a strategy which has an edge helps, but honestly, I would imagine most traders would say that they had moments where all the best plans we completely overlooked.
The way it works in trading is that you will either make money on the next trade, or lose money. You have to accept this, and see how you react to this. Now don't get me wrong, this is actually much more complicated than it sounds. I think it was Mark Douglas who in his book gave good example of how gambling is different than trading, and much harder. With gambling, you know how much you're willing to lose, you know when the game starts, and when it stops, and then its done. With trading, you can of course stay in longer, and make more, and lose more. There really is no end to the bet if you don't respect your stops and targets. This makes it way more complex.
But if you just start with a basic amount of knowledge, and a basic idea of what you're looking to do, there is nothing wrong with taking a real trade if you will stick to your parameters. For example, assume you want to get in on a trade when you see price getting to some previous swing low because you've noticed that a couple of times during the day, it has always bounced back up. So perhaps you enter, hoping to buy at 2200 and make 4 points. If you're wrong, you have a stop it place to get out at 1998. For this risk to reward ratio of 1:2, you really only need to be right 50% of the time to have a killer profits over long term.
The interesting part would be is if you can actually honor your stop, and get out when you said you would, and if you can also honor your target, and get the 4 points that you were hoping for. Now don't get me wrong, I'm not suggesting that its always best to be firm and dictate what price has to do, but when you're starting out, you simply don't have the experience to be in the rhythm of the market, you just want to see if you can control yourself.
If you did this same type of trade 10 times, and knowing that you only need to win 5 to make a killing, would you still be willing to make these trades if the first 2 don't work out? Will you let your psychology affect your ability to put on the next trade simply because you lost twice in a row already? This is the type of shit you need to figure out.
Now who really knows what the win rate should be, and some don't even subscribe to the notion that you can assign win rates like this since each moment in the market is unique, but you need to see if you can stick to a certain plan that has a decent set of parameters that takes into account the trade sometimes working out and sometimes not.
What you will not find at ET is people actually posting about this stuff so you don't get the impression that its important. But if some of the traders who are actually profitable posted on here, and posted this type of stuff, you would see how it almost looks random. There are a bunch of losses, there are a bunch of wins, and its just business as usual.
Also, figuring out why some trades don't work is good, but at the same time, you can't be wrapped up in it because its impossible to figure this out. Mark Douglas says that when a trade doesn't work out, it simply means that those traders who would have otherwise bought at this level and hence helped it take off simply weren't around to buy. So if you're trying to figure out why the trade didn't work, you will never know since you have no idea they were about to go to lunch, etc.
I bet that most beginning traders would do better with random entries but very strict trade management rules rather than trying very hard to predict where price is going and then freaking out when it doesn't do what they thought it would and then get desperate to get out, or double down, or whatever else their emotions tells them to do.
Once you get used to the statistical nature of trading, and detach yourself emotionally from it, you can work on finessing where and when to enter, and in what direction.