Paper Trading Vs The Real Deal

[2manywhiners]

Spydertrader-

I see where you're coming from with this. I have said previously that paper trading isn't a complete waste of time. It depends on how it is being used. Someone with trading experience who is using it to form a new strategy, anyone testing automated order executions, anyone learning a new platform, etc... these are all good uses.

However, if a beginning trader uses paper trading in order to learn how to trade, without learning all of the important aspects of trading first, then they're setting themselves up for failure.

Like I said before, a new trader should open a Live account, and stare in awe of the Level II and tick charts. THEN take the tutorials, then learn how to use the platform. Tinker with Sim software, but DO NOT use Sim-ware to make assumptions of how the market executes orders, or whether or not your trading strategy is viable. Learn how to execute your plan properly, then start trading very small. The results from trading Live early on, will benefit you substantially in the long run. Besides, if Sim trading and Live trading are really so close to being the same thing, you shouldn't have to worry about losing any money then, right?

Anyone who has mastered the art of paper trading, you're a joke. If you can't figure out if a strategy conceivably works well within a few days, or a couple of weeks tops, then you're wasting your time. Even worse you're going to harm your psyche if you get overconfident before going Live. Career paper traders: Re-read a) through p). Then, quit Procrastinating as...

...rols said:

Just do it!!

"The biggest risk in life is to never take one."

Now go say Hello, she's been waiting for you...

 

[WmWaster]

Quote from Spydertrader:
I agree Simulated Trading provides zero feedback towards experiencing the psychological aspects of trading. One simply cannot experience the "pucker factor" often evident when new traders enter with size beyond their experience level.

I think this is simply due to people's attitude towards sim trade. People just don't care when they sim trade. That's why simulated trading provides zero feedback towards experiencing the psychological aspects of trading.

However, rules based traders (or systems traders, if you will) enter and exit based on various (and often extremely diverse) sets of criteria. A new trader often experiences difficulty keeping the rules straight in their mind - especially when market conditions often provide exceptions to those rules. Simulated Trading provides a new trader an opportunity to thoroughly learn the mechanics of their system - separate from the psychological aspects of trading real money.

Yes, rule-based trading, which I think most traders should do. You can only do well if you plan well. Acting arbitrarily is a way towards failure.

I just don't understand why people just can't follow their preset rules. If they have spent enough time and have rpoved to be profitable, why don't you follow them strictly when trading real? OK, you are worried that succuess in the past doesn't mean success in future. But then what did you follow when you trade real? New traders just abandon their well-thought plans, but to follow emotions or silly thoughts which come out of the blue. But why aren't you worried about whether your emotions/ unresearched/unproved ideas work.

Hesitant on things which are well-thought, but believe firmly something which come out of the blue. Don't you feel it is ironic?

Maybe they spend too less time, or they are emotional (or have low EQ). If one is long-sighted, you will see emotions just won't help you. Following your emotions is equal to suicide.

If you are serious in sim trading, you will know what you should react when you trade.

Bending your rules for the sake of fitting a few exceptions is bad unless you are sure you can identity when . Trading is a calculated risk/reward game, not surefire game which you must gain all the time. If you care too much about exceptions, you will mess things up or miss more opportunities. Overworry is unhealthy to you.

A time and a place exists when trading with real money outweigh the benefits of Simulated Trading. For a new trader, that time comes after they have spent time on a Simulator (learning the mechanics of their new system). One must first learn to crawl before learning to walk, run or fly. Simulated Trading permits the new trader to crawl (learn the system), before walking (trading live with small size), running (scaling up) or flying (trading maximum size based on one's risk parameters).

I trade full time as my only source of income, and I give the above recommendation to every new trader starting out.

- Spydertrader

I do agree most poeple need to trade small before they can win, which is sad but true. That may be one of the mian reasons why new traders fail.

It's sad but true since most people can only learn after the lessons. They need to get some real pains before they can grow up. If you are such a person, then go ahead and trade small.

New traders fail to see what they need to do is to trade seriously with an unemotional mind, which is what they did when they sim trading. New traders just carry their trading strategies to the market, but forget to carry their psychology along with them.

To sum up, if you are serious in sim trading, you can destined to winning big if you can copy EVERYTHING YOU DID in sim trading. That's it!

 

[Jayford]

Quote from WmWaster:


I just don't understand why people just can't follow their preset rules.

This is the whole point! Making this statement leads me to believe you are a career paper trader. This is exactly why so many experienced traders keep bashing paper trading.

99.9% of traders will have a very difficult time following ANY system when they first go live. If you don't understand this, then you don't trade.

After a bit of pain, the systems get easier to follow (usually less pain when you actually follow them).

Note, it doesn't matter how proven the system is, you will try to anticipate it, or outright ignore it when you see prices flying around which affect your P&L.

 

[WmWaster]

Quote from Jayford:
99.9% of traders will have a very difficult time following ANY system when they first go live. If you don't understand this, then you don't trade.

After a bit of pain, the systems get easier to follow (usually less pain when you actually follow them).

Note, it doesn't matter how proven the system is, you will try to anticipate it, or outright ignore it when you see prices flying around which affect your P&L.

Well-said.

You pinpointed why most new traders have to lose money before they grow up - emotional & shortsighted.

They just don't understand what they should do when they trade live.

This is a website which has a very simple trading strategy that works. LOL! Some of the turtlers still couldn't gain even if they get the "secrets of trading":
http://www.tradingblox.com/originalturtles/index.htm

 

[2manywhiners]

And how long have you been successfully trading real, Live money? What was that? Still no answer?


Go away. You are revealing your IQ to all of ET.


By the way, you know EQ (or Educational Quotient) is typically used to grade an educational system's efficiency, and not the IQ (Intelligence Quotient) of their students and graduates right?

Are you illiterate? You sound like it. But not all the time, just when typeing yu arr. derr.

 

[romik]

This might be useful for novice traders and under capitalized, by under capitalized I refer to accounts of $5k (for instance) that wish to pull $1000k per trade risking same amount if not more (Not recommended by the way), is perhaps to think that there is no real money at stake. Our mind does often influence our rational decision making processes when one knows that real money is on the line. I have mentioned it in another post that what I've found useful is switching off the PnL window and trading purely from % points.

Romik

P.S. 2manywhiners, you are fighting a non-winning battle here, know what I mean man?

 

[JimmyJam]

Quote from romik:

P.S. 2manywhiners, you are fighting a non-winning battle here, know what I mean man?

He he he, OK, your camp wins.

There's absolutely no reason to paper trade or trade SIM a new account or strategy for beginner, intermediate or advanced traders.

SO DON'T DO IT!

I just wanted to see if that looked as stupid written as it sounds.

And yeah, it does.

Best Regards,

Jimmy

 

[WmWaster]

Quote from romik:

This might be useful for novice traders and under capitalized, by under capitalized I refer to accounts of $5k (for instance) that wish to pull $1000k per trade risking same amount if not more (Not recommended by the way), is perhaps to think that there is no real money at stake. Our mind does often influence our rational decision making processes when one knows that real money is on the line. I have mentioned it in another post that what I've found useful is switching off the PnL window and trading purely from % points.

Romik

P.S. 2manywhiners, you are fighting a non-winning battle here, know what I mean man?

I find % is more meaningful than the actual P/L. One who lose $5000 with capital of $10,000 is different from one with $100,000. % is a better way to measure risk reward.

 

[Don Bright]

Quote from WmWaster:

I find % is more meaningful than the actual P/L. One who lose $5000 with capital of $10,000 is different from one with $100,000. % is a better way to measure risk reward.

(Comment only)... I tend to disagree with this % vs. P&L in this regard. A trader who makes 200% per year with $5K in their account, is going to have a hard time surviving on $10K of gross profits.

Since the $$ is merely a tool, and in the case of our traders who may have only $20K, but "use" $2million of our money to trade with....they are looking to make a 6 figure living....not trying to get ROI on their $$. And.....they still measure their risk based on their amount of capital, not the amount they're "using". "use" of captial is not like leverage..."use" means that you can take part in the more capital intensive, lower risk, higher reward strategies, rather than being stuck trying very difficult trading methods.

IMO, traders get "paid" for their expertise, discipline, willing to provide good markets, and hard work....ROI is the money you make with the "Passive" capital in my mind.

Again, IMO only....

Don

 

[WmWaster]

Quote from Don Bright:

(Comment only)... I tend to disagree with this % vs. P&L in this regard. A trader who makes 200% per year with $5K in their account, is going to have a hard time surviving on $10K of gross profits.

Since the $$ is merely a tool, and in the case of our traders who may have only $20K, but "use" $2million of our money to trade with....they are looking to make a 6 figure living....not trying to get ROI on their $$. And.....they still measure their risk based on their amount of capital, not the amount they're "using". "use" of captial is not like leverage..."use" means that you can take part in the more capital intensive, lower risk, higher reward strategies, rather than being stuck trying very difficult trading methods.

IMO, traders get "paid" for their expertise, discipline, willing to provide good markets, and hard work....ROI is the money you make with the "Passive" capital in my mind.

Again, IMO only....

Don

Yes, you are right, so you can say that again.

Actually what I really wish to say is "%" is often more strategically & statistically meaningful than "actual figure".

Let's say I invested $100,000 on one stock. If it retraces 1% in price, I'm losing $1000. Will I become be scared off and sell immediately? No, although $1000 looks like a large sum of moeny, 1% retracement is just normal. You can't be too concerned about the actual moeny loss, or you will get shaked out easily. What's more, it's hard for you to let your profit run since you may be tempted to take profits when you see $1000 in your P/L account.

I think many trading strategies need to be based on %, NOT actual amount. Like risk management, one may set a 5% of capital on any single investment at max. To set a stop-loss, it is frequent to use %, NOT actual amount. To me, I will only choose a technical stop-loss point. If I can't accept the risk for this trade (because the entry point and the technical cut-los point is too wide away), I either reduce the size of the trade or not trade at all.

A stock rising 10 points has little relevance to me. I need to know the % rise of a stock. This is how my money will compound. When I search for stocks, I use % more often than the actual amount since they are more comparable with each other and so meaningful.

But % can be sometimes misleading. A company has 3000% may due to the fact it has nearly a zero net profit last year. So the 3000% here is a bit misleading.