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So basically papertrading is...
- Thread starter John47
- Start date
Read the book Pit Bull by Marty Schwartz. You will read a story near the end where Schwartz trades OPM, and nearly kills himself from all the stress. Not suicide, but he is literally dying in the hospital from all the stress he put on himself for results. The book is a good read for other reasons as well, worth reading as an educational book on the life of a trader.
The value of papertrading/simulation differs between testing a 100% mechanical system and a discretionary trading approach. If the mechanical system is automated and fill assumptions in the papertrading/simulation are reasonable then there is some value. However, emotions do strange things to people when money is on the line. All those nice discretionary profits can evaporate when your heart rate triples and your fight or flight instinct kicks in. The greater the % of discretionary judgement used in trading, the less value papertrading/simulation has IMO.
And if your papertrading fill assumptions are not valid then papertrading can actually lead to harmful expectations when real money is put on the line.
Also do a search on papertrading and OPM. These subjects have been covered hundreds of times.
The value of papertrading/simulation differs between testing a 100% mechanical system and a discretionary trading approach. If the mechanical system is automated and fill assumptions in the papertrading/simulation are reasonable then there is some value. However, emotions do strange things to people when money is on the line. All those nice discretionary profits can evaporate when your heart rate triples and your fight or flight instinct kicks in. The greater the % of discretionary judgement used in trading, the less value papertrading/simulation has IMO.
And if your papertrading fill assumptions are not valid then papertrading can actually lead to harmful expectations when real money is put on the line.
Also do a search on papertrading and OPM. These subjects have been covered hundreds of times.
Paper trading is usually considered in terms of simulation without penetration. However, it can also be an invaluable means of testing theories of market action in real time and in isolation from other factors, without direct reference to actual trading.
Quote from John47:
What about the huge hedge fund traders, that get a billion dollars to trade that isn't there own money? Just like papertrading?
You know, that statement actually makes me think that it would be interesting to do some studies on the success of individual traders using their own capital as compared to that of a hedge fund trader.
There is a theory in finance called principal-agent theory, which basically points out the difficulty in getting someone to act in the best interests of the company they work for, an outside investor, etc.
Quote from nkhoi:
with the new generation of first class trading plat form such as NinjaTrader paper trading is as real as it get the only thing missing is your money.
While it may be true that there are now many options for trading in a simulated environment, it can't compare with the thinking and emotions involved when your money is on the line.
Papertrading is totally pussy. You do and don't do things with real money that the masturbatory self-absorption of paper trading doesn't admit.
Quote from Chagi:
While it may be true that there are now many options for trading in a simulated environment, it can't compare with the thinking and emotions involved when your money is on the line.
I used to be against papertrading. Not anymore. If you are a
discretionary trader, papertrading to see if you can make a profit
will tell a lot whether it will work with the style you are attempting
to use. No if and or buts about it. If you can't make it work on
paper you will not make it work with real $$$.
I guess it all depends on whether you are serious when you papertrade
and whether you have what it takes when you move it to real $$$.
If your emotions run your trading, then your screwed no matter what...