Trading A System On Paper

How long should it take to trade a system on paper and understand what edge (if any) it has before trading that system in anger?

I look forward to hearing your experience ...

Oops I just found a similar thread below: this response is from this thread. I'd be interested in the scope of "the full range of market conditions". In a weather analogy in parts of the UK you can get all four seasons in one 24 hour period:
"How long to paper trade depends on how much back-testing you've done on your trading system. Ideally, you should back-test over the full range of market conditions you are likely to face trading that system. If you haven't done that, then you'll want to paper trader over a similar sort of span. If you have done the back-testing, then once you are confident you can execute the system as designed and intended, then make the move to real money.
__________________
John Forman
Author - The Essentials of Trading "

Response by ....... to post by Highnoon - see below. Don't want to tread on your toes Highnoon.

Hello Vugs and welcome to the wonderful world of traing

There are no set timeframes for how long it will take for you to find your edge. There are traders on here that have been doing this everyday for years and still have not finalized their system on paper.

Paper trading a system requires a lot of discipline which many lack. But if you can see yourself through it, then it will highlight areas for improvement etc and may even get you through to the otherside.
The main purpose of it is to get a clearer idea of your “edge”. To do this will require strict adherence to a rigid set of rules. If you think you have done this, write them down, go over them again and make sure they are very clear, right down to the last detail. Then set yourself a target to follow them. Expect losses because it is highly unlikely that on the outset you will develop a high winning system. This is the key to success in paper trading, many face a few losses and mentally they give up, and instead of focusing on finding out why the system did not work they throw it away.

Just something that may save you a lot of wasted time - there is no holy grail out there that you can search fof on the internet and will make you successful overnight. Yes, you will find lots of information that will help you. Your Holy Grail will be all your own effort.

Look upon trading as a journey with no final destination, its wherever you lay your hat, will be your home. But the experience will be unrivalled.

Good luck.

vugs said:

How long should it take to trade a system on paper and understand what edge (if any) it has before trading that system in anger?

I look forward to hearing your experience ...

Oops I just found a similar thread below: this response is from this thread. I'd be interested in the scope of "the full range of market conditions". In a weather analogy in parts of the UK you can get all four seasons in one 24 hour period:
"How long to paper trade depends on how much back-testing you've done on your trading system. Ideally, you should back-test over the full range of market conditions you are likely to face trading that system. If you haven't done that, then you'll want to paper trader over a similar sort of span. If you have done the back-testing, then once you are confident you can execute the system as designed and intended, then make the move to real money.
__________________
John Forman
Author - The Essentials of Trading "

Response by ....... to post by Highnoon - see below. Don't want to tread on your toes Highnoon.

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Well, I know I'm going to get shouted at but i dont believe in paper trading. It is so easy to look back at a trade and see the right entry/exit. This gives you false confidence and then you trade for real and lose - why you think they offer demo accounts. How many people play poker on demo accounts and have millions - put them in the real world and is so different. Some of the sb firm let you trade from 50p a point - it aint a lot and you will lose as this is not an easy game, but at least your in the market place. Pay to learn.

Thanks for these interesting and honest thoughts. It feels strangely reassuring to receive communications from like-minded people - Thanks again for the welcome.

I feel that I need to start paper trading to build up my knowledge. I also want to start trading using well defined risk management using an ADX trend based system otherwise I fear I may never get started.
I will then build up enough data to determine success rates / amount gained or lost / at risk capital, etc. in both the real world and on paper. I don't want to get wiped out, but for me trading for real will be a good driver.

vugs said:

How long should it take to trade a system on paper and understand what edge (if any) it has before trading that system in anger?

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Paper Trading offers limited value IMO. Ideally,you should already believe that you have found an edge. This would have been achieved through personal experience of looking at charts over a long period of time or instead through backtesting ideas. Paper Trading should be used just to confirm this view.

As Claudia has already mentioned, the problem with paper trading is that a great deal of discipline is required. It is too easy to see the winning trades (and those which would have lost a lot!!) but those trades which would have lost only a little or were scratch trades are easy to miss. This oversight can have a huge impact on ones results.

Another major problem with only doing Paper Trading is that one has to continue doing it until the results obtained have some form of statistical usefulness. This is vital to prove a strategy has a positive expectancy.

In addition, (as mentioned in your original post) ideally one would want to test ones strategy through different Mrkt conditions which is going to be impossible if one is paper trading. However, IMO there is a possible solution for this type of scenario.

Chorlton