Paper Trading: Waste of Time or Valid Learning Method?

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Old Sep 19, 2005, 7:59am   #1
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Paper Trading: Waste of Time or Valid Learning Method?

We've just published a new T2W article called "Paper Trading: Waste of Time or Valid Learning Method?" by Vadym Graifer.

Quick Summary: Paper trading can be either valuable or worthless, depending on your approach.

PS. Don't forget to rate the article after you've read it and share your comments on this thread.
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Old Sep 19, 2005, 10:53am   #2
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10/10 score from me.

Paper trading is great for newbies, trying new systems or tweaking your system.

Best show some paper trade profit, before risking real cash.

If you cannot be profitable with paper trading, you are not going to be profitable with real money. So I would suggest that anyone new at the game starts with paper trading first, though being very strict, as the article suggests.
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Old Sep 19, 2005, 11:28am   #3
 
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Good article.

The warning "Do not use paper trading to project what kind of money you are going to make" is particularly apposite.

Only a few will match their paper results for real - so, after paper trading, start small.

good trading (paper or otherwise)

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Old Sep 19, 2005, 11:39am   #4
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I've given this 10 also : I agree with every word. I first paper traded traded options via Peter Hall at FTS who was absolutely passionate about making sure that investors paper traded until they were happy with the mechanics (this was pre-internet) and, crucially, the size of their positions. Peter even went as far as to make an arrangement with a stockbroker who allowed you to place 'dummy trades' as if they were real, which is about as close as you can get to the real thing. (Sadly, he's now retired)

I still made mistakes i.e. losses, still do, when I went live, but by the time I did I was happy that that was just part of the process, a cost of doing business, if you like, in the way that a pc, Sharescope, the FT etc. are, and the key to successful trading was winning more than you lost. You can only do that, in my view, if you have a system and, whenever I try anything new, I paper trade it first.

The thing I particularly agree with here is 'don't kid yourself' !!! It is easier to do that when your paper trading, for obvious reasons, and I think most people proably do when they start.

It is only when you're trading with real money that you really feel the pleasure and pain !!!
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Old Sep 19, 2005, 11:54am   #5
 
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10 / 10. A well written and informative article. I would be of the opinion that paper trading is an imensely valuable tool. One other point that was not mentioned, is that here you will begin to build your discipline that will serve you well in the live trading, as the author suggest everything should be written down, if it isn't written down, you didn't do it. If it is written down, then that is what you did, so there can be no hindsight manipulation of........"well I would have closed there if it was real" This discipline of writing down every action and accepting the result good or bad will be the foundation of your discipline in the real situation.
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Old Sep 19, 2005, 3:57pm   #6
 
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Welcome, Vad. Good to see you here at last. Hope to hear more from you.

--Db
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Old Sep 19, 2005, 5:14pm   #7
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Paper Trading: Waste of Time or Valid Learning Method?
Valid.
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Old Sep 19, 2005, 5:21pm   #8
 
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Better than nothing at all. But, simulators can give very close to real results - thats why the bigger arcades use them. I have used them and they are very good tools for trying out new markets.

The problem with paper trades is that its a bit like playing golf on the driving range. You learn nothing from the bad shots and think you are when hit one out the middle.
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Old Sep 19, 2005, 6:13pm   #9
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A good article in my view. There are a number of realtime simulators that have been good for helping with the paper trading stage. One of the best was TSIM from http://www.tradingsimulation.com/


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Old Sep 22, 2005, 3:44pm   #10
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As someone trying to finalise a system I find this article hits the nail on the head.
The valuable comment re keeping your trader's number on speed dial in the event of a pc crash leads me to another point - once you have a system that works on paper, keep the same records when you go live. It will seem superfluous until you have that pc crash and try to remember what trades you have open when making that all important call.
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Old Sep 22, 2005, 11:23pm   #11
 
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Good Article, I agree with the saying that Paper trading is good.
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Old Oct 17, 2005, 4:18am   #12
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Papertrading? I guess I disagree with everybody else. I don't see it as very useful.
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Old Oct 17, 2005, 4:24am   #13
 
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lol ptt ... you might be kind enough to enlighten us with an argument to support your opinion.
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Old Oct 17, 2005, 4:40am   #14
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Quote:
Originally Posted by Kiwi
lol ptt ... you might be kind enough to enlighten us with an argument to support your opinion.
Emotions don't kick in until real money is on the line. And emotions can wreck any good system. No system is really tested until money is put on the line because only then can it be tested by the emotional factor. Even mechanical system need to be tested by the emotional factor.
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Old Oct 17, 2005, 5:31am   #15
 
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I agree with everything you said about the importance of the emotional impact of money --- but so does the author of the article.

That doesnt negate the value of paper trading for a competent trader for:
- forward testing a system
- running a "failed strategy" to rebuild confidence or prove that market conditions have come back into line

or for a new trader for the above plus:
- learning more about execution (noting the imperfections of simulations)
- learning more about what they have to do to be ready to execute.

Its amazing the number of new traders who didn't paper trader or didnt paper trade long enough who do what Mark Douglas (who also agrees with you ) would characterize as emotional damage to themselves and lose tens of thousands of dollars and (in some cases) create bad habits.

So, I'd agree about it being "trading lite" but would argue that there are some good places for it.

Edit: After reading your response: Yes, I wondered if you had

Last edited by nine; Oct 17, 2005 at 11:25pm.
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