Paper trading

[Jayford]

Quote from Lamont_C:

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.

I don't think you are on the same page here.

The guy already has a system that works. Time to see what really happens, and stop wasting time projecting returns.

BTW, you can back test your system as far back as you want to test it. No need to paper trade it in real time unless you are practicing execution or something.

For those of you who believe that past results don't mean it will work now, or curve fitting doesn't work, that's a valid point, and always debatable.

However, you run into the EXACT same problem paper trading the system. Just because it works while you paper trade it, there is no guarantee it will work in the future. The reason why I bring up this point, is that it is just as valid to use a back tested system, or even more so due to the number of trades you can test, as it is to paper trade it in real time. So ya don't really need to.

Its when you throw money into the mix that it is really tested.

But this thread is should the guy keep paper trading his system that he thinks is great? I say absolutely not. Test it for real, even with really small amounts. Then you see if it works. If paper trading worked even half as well as real world, there would be a much higher percentage of winning traders.

Jay

 

[Lamont_C]

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 [/B]

To call what mlbeers is doing "paper trading", however, is like calling what most American Idol contestants do "singing".

Paper trading is essential. If one isn't doing it properly, or if one calls what one is doing "paper trading" when it is primarily guess-'n-bet, that's hardly an indictment of paper trading.

 

[Lamont_C]

Quote from Jayford:

I don't think you are on the same page here.

The guy already has a system that works. Time to see what really happens, and stop wasting time projecting returns.

And what leads you to believe that he has a system, much less a consistently profitable one?

 

[BSAM]

Quote from Jayford:

.....The guy already has a system that works......

Jayford.....

Please go back and read his first three posts on this thread. This guy sounds extremely ripe to lose a wad of money, IMO. He sounds like a kid who has been shown where to put the key in the ignition and where the steering wheel is located, so now he is ready to take a cruise down the Hollywood Freeway.:eek:

 

[kubilai]

Quote from Lamont_C:

To call what mlbeers is doing "paper trading", however, is like calling what most American Idol contestants do "singing".

Paper trading is essential. If one isn't doing it properly, or if one calls what one is doing "paper trading" when it is primarily guess-'n-bet, that's hardly an indictment of paper trading.

Lamont,

You seem to think a new trader can become a full-fledged systems trader right out of the gate by paper trading properly. I don't think most of us work that way, but perhaps you have a valid point.

Care to elaborate what do you mean by proper paper trading? How does a new trader convince himself all the hard work in designing, backtesting and executing a trading system is worth the effort, without first failing miserably trading willy-nilly?

BSAM,

Better the kid gets the keys now than later, when he gets the keys to a nuclear submarine.

 

[BSAM]

Quote from kubilai:.....

BSAM,

Better the kid gets the keys now than later, when he gets the keys to a nuclear submarine.

Hmmm.....Now you've got me thinking. Let's see would it be better to get destroyed on the Hollywood Freeway or in a nuke sub accident? Either way, it's assured destruction.

Nope. Better to have at least a chance of survival.

 

[Lamont_C]

Quote from kubilai:

Lamont,

You seem to think a new trader can become a full-fledged systems trader right out of the gate by paper trading properly. I don't think most of us work that way, but perhaps you have a valid point.

Care to elaborate what do you mean by proper paper trading? How does a new trader convince himself all the hard work in designing, backtesting and executing a trading system is worth the effort, without first failing miserably trading willy-nilly?

Hardly right out of the gate. In brief, first he has to define his setups. These might be with or without indicators, computer-aided or manual. Then he has to test the setups to determine whether or not they meet his profit objectives. If they don't, he starts over.

If they do, he then forward-tests, preferably through replay. If they don't continue to meet the objectives, then he figures out what's wrong, goes back to where the system works, then begins again.

Only when the system is consistently profitable does he begin paper trading, and then only to find out if the system works in real time. If it doesn't, he backs up. If it does, he begins trading for real: 10-share lots, one YM contract, whatever. If something goes wrong, he backs up again. If everything works, he increases his size.

Yes, this takes more than a week or two. It can take months. Most newbies don't have the drive or the patience, which is a large part of why they so often fail. But trading without having the slightest idea what one's expectancy is, regardless of how one defines it or measures it, is little different than going to Vegas. In fact, going to Vegas is probably a better bet, if one has any experience with whatever game he plays.

 

[Jayford]

Quote from BSAM:

Jayford.....

Please go back and read his first three posts on this thread. This guy sounds extremely ripe to lose a wad of money, IMO. He sounds like a kid who has been shown where to put the key in the ignition and where the steering wheel is located, so now he is ready to take a cruise down the Hollywood Freeway.:eek:

Good point.

I assumed he was confident with the approach he was using. I completely discounted the 5 days statement, assuming he back tested.

Probably a wrong assumption on my side now that I reread it.

If he has no system, then no, I don't think he should be trading live.

 

[kubilai]

BSAM,

Hehe, your analogy is exaggerated so I had to as well. Assuming mlbeers is a kid with a "wad" saved up, telling him to venture out now is more like giving him a bike. How much is a "wad" for a kid? $2k? $10k? Would you rather telling him to venture out later, when he had a decade worth of income saved up to blow away?

Of course it's nice to give himself a better edge by more preparation, he'll still have to take some big losses to learn the lessons. If you tell people they can make great money trading without the hard lessons during the late 90s, they'll believe you. But now? Wrong year hehe...

Lamont,

I agree with you for the best way to proceed. The only part I don't agree is the likelyhood of someone being able to follow that regimen without prior lessons of failure.

 

[Lamont_C]

Quote from kubilai:



Lamont,

I agree with you for the best way to proceed. The only part I don't agree is the likelyhood of someone being able to follow that regimen without prior lessons of failure.

There will be failures throughout, almost from the beginning. The key is to avoid debilitating failures and stay in the game. But continuing to throw oneself against the glass and hope for the best is not likely to be a productive course.