Paper trading
- Thread starter mlbeers
- Start date
Becuase i wouldnt do it. Now I think it is time for me to try a buying on the real market with little money like they said so i can get the feel for losing $$$$ at least it will only be a few hundred right now I said, once you have the mechanics down, ie your approach, then its worthless. I never said don't go into live trading without a plan!
So many people believe that your real results will be similar if you are a systems trader. This is absolutely not true. Not even close.
A previous post said its only the emotional part you need to get after you have your system down.
This is 90% of the game guys!
Anyone who trades for a living knows this.
Jay
For an experienced pro, with complete trust in his/ her results, I believe this is possible. This is someone who has made cash consistently for quite some time.
For a newbie, no way, emotions will be everything.
Even with a rock solid system. One of the following most likely will happen.
A) they will ignore many of their signals
B) they will take small profits as soon as they see them
C) after a few losses they will toss the system altogether and start revenge trading.
One of the most famous quotes ever, "A good trader can trade a bad system, a bad trader cannot trade a good system" This is entirely due to emotional control involving money.
I've been at this, full time, for 18 years, and seen it time and time again. There are numerous threads even here on ET where people can't follow their signals, and an entire industry of psychology trading books regarding this all to common occurrence.
I believe it is far better to work through these issues as soon as you have your system down, which if you back test long enough, shouldn't require much paper trading. Do it with really small trades to limit losses. It does not take much cash for the emotions to kick in. I bet most people would experience this with mini forex lots where its only a buck per pip.
The alternative is to paper trade for whatever time frame, expecting unrealistic results, only to be disappointed when it doesn't work out. Once you work through some of the emotional stuff, which takes practice, then I believe its much more realistic to set goals, etc.
Jay
A newbie, however, won't be "trading for a living". And if he commits any of the errors you list, he shouldn't be trying.
The purpose of paper trading is not to work out emotional issues but to determine whether or not the system can be profitable. Not "is", but "can be". Because if it isn't consistently profitable in paper trading, it sure won't become profitable when trading with real money.
To say that PT is "worthless" requires qualification. Otherwise, the characterization is misleading and potentially damaging.
The purpose of paper trading is not to work out emotional issues but to determine whether or not the system can be profitable. Not "is", but "can be". Because if it isn't consistently profitable in paper trading, it sure won't become profitable when trading with real money.
To say that PT is "worthless" requires qualification. Otherwise, the characterization is misleading and potentially damaging.
I agree with Jayford that mlbeers needs to trade (small) real money now. There are some critical questions that need to be answered that cannot be shown by paper trading:
- What's my risk tolerance?
- Am I better as a discretionary trader or systems trader?
- Am I a gambler?
Anyway it's best to learn the most difficult lessons early, because mlbreers prob has much less capital to blow away now than later. There's always a risk for trading to bring out the compulsive gambler. My max drawdown when I started trading was about 60%, luckily my capital back then was only about 10% of what I have now. If I started trading now instead of back then, I likely would have had to blow away 60% of my current capital to learn the hard lessons. Then as now, I was willing to risk all my capital. Then not as now, I did not have a statistical edge.
Some of you pointed out paper trading is essential before trading real money. That's true. Backtesting after all is paper trading, with the computer to keep you honest while paper trading the past. For mlbeers though, some hard lessons about psychology need to be learned first. Who knows, maybe he has the right psychology to be a great discretionary trader, but he won't find out by paper trading
- What's my risk tolerance?
- Am I better as a discretionary trader or systems trader?
- Am I a gambler?
Anyway it's best to learn the most difficult lessons early, because mlbreers prob has much less capital to blow away now than later. There's always a risk for trading to bring out the compulsive gambler. My max drawdown when I started trading was about 60%, luckily my capital back then was only about 10% of what I have now. If I started trading now instead of back then, I likely would have had to blow away 60% of my current capital to learn the hard lessons. Then as now, I was willing to risk all my capital. Then not as now, I did not have a statistical edge.
Some of you pointed out paper trading is essential before trading real money. That's true. Backtesting after all is paper trading, with the computer to keep you honest while paper trading the past. For mlbeers though, some hard lessons about psychology need to be learned first. Who knows, maybe he has the right psychology to be a great discretionary trader, but he won't find out by paper trading
"Paper trading" is fine if:
1) You are an established trader and the trading is on a simmulator and you are exploring an edge
2) You are an established trader but are getting used to a new trading platform
If you are just starting out as a trader, you want to move from simulated trades to 100 shares as soon as possible.
nitro
1) You are an established trader and the trading is on a simmulator and you are exploring an edge
2) You are an established trader but are getting used to a new trading platform
If you are just starting out as a trader, you want to move from simulated trades to 100 shares as soon as possible.
nitro