Is paper trading pants?

IMO it is as useful as the proverbial chocolate teapot....
I got involved in a thread over on elite. Would like to hear what the guys (and gals) here think.
http://www.elitetrader.com/vb/showthread.php?threadid=67201

is paper trading pants what ?

I agree with the whole chocolate teapot/ashtray on a motorbike thing.

No matter how much you try to convince yourself that "you'd sell half there" and "move that stop there" - that's all it is... paper trading. Stick some real money on the trade and if you act exactly the same then you've learnt something. However I suspect the vast majority (myself included) trade somewhat differently when there is no money involved.

Any fool can double his capital in 5 days paper trading.....

rossored said:

I agree with the whole chocolate teapot/ashtray on a motorbike thing.

No matter how much you try to convince yourself that "you'd sell half there" and "move that stop there" - that's all it is... paper trading. Stick some real money on the trade and if you act exactly the same then you've learnt something. However I suspect the vast majority (myself included) trade somewhat differently when there is no money involved.

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and I should know....

I rest my case....

Paper Pants

rossored said:

I agree with the whole chocolate teapot/ashtray on a motorbike thing.

No matter how much you try to convince yourself that "you'd sell half there" and "move that stop there" - that's all it is... paper trading. Stick some real money on the trade and if you act exactly the same then you've learnt something. However I suspect the vast majority (myself included) trade somewhat differently when there is no money involved.

Click to expand...

Paper Pants :!: Now theres an idea :idea: Wipe and throw away

Sorry - I'm in holday mode for now :cheesy:


On a serious note: real money changes your emotional make up when trading. Happens to most people.

neil said:

Paper Pants :!: Now theres an idea :idea: Wipe and throw away

Sorry - I'm in holday mode for now :cheesy:


On a serious note: real money changes your emotional make up when trading. Happens to most people.

Click to expand...

Before we go any further let us clarify something....

'pants' has nothing to do with underpants though I do like the paper underpants idea.
May be the ideal back-end accessory for every newbie and his tradestation

http://www.peevish.co.uk/slang/p.htm

rols said:

and I should know....

I rest my case....

Click to expand...

Go figure. You saw all those trades with the same set of eyes and brain, and pulled the trigger without hesitation, I'm sure. The old grey matter just invokes a different set of rules for applying the execution rules when there's cash on the line.

Surely if your paper trading DOESN'T work then you've saved yourself some money.....

I saw a test somewhere where the trading firm tested newbies with paper trading to see if they were ready to trade with real money. I guess if you think it's a real test then you're likely to respond in the same way (ie your ability on the line) as with real money.

Maybe if you "think" it's pants it is, however if you're concerned about what the results may show then it's not.

Is paper trading pants?

Click to expand...

Yes.

Surely if your paper trading DOESN'T work then you've saved yourself some money.....

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No. Because you won't trade the same with money involved.

Hoggums said:

Surely if your paper trading DOESN'T work then you've saved yourself some money.....

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Yes, this is a good point!

I myself, are paper trading at the moment and will be doing so until i actually make profit in paper money and not have to refund the demo account every once in a while.

When i consistantly get positive results, i'll open some kind of mini account and only risk a small amount of money on my trades. When this seems to be profitable, i'll add more real money. And so on...

I think this process will take some years. That's ok, I'm only just about to graduate, and don't even have any money right now...

I understand that the psychological effect of actually risk real money is going to do some "damage" to the trading. But when you're first starting out, i think paper trading is a must.

Some enterprising front end developer (TSim?) needs to add an "Am I or aren't I?" feature whereby you know that sometimes you're paper trading and sometimes you're trading for real, but the front end doesn't tell you which mode you're in, and toggles at random. Per trade or per hour. Per day might be a bit "ouch". Hey presto, the worst^H^H^H^H^Hbest of both worlds. Hope and anxiety yinging and yanging.

Alternatively, why doesn't a front end neurally netally analyse price immediately before your trades, and eventually start saying things like "Ooh, you sure about that? You know what happened last time. OK Cancel"

Scalping is hard to simulate or 'paper trade'. Slippage and the chance of buying-on-the bid or selling-on-the-offer seem difficult to program. Some programs (eg Bracket trader) give unrealistic fills. I use paper trading to develop ideas and also to practise unemotionaly hitting the button, but one needs to be careful to check that any strategies developed will play out to be profitable in the real world.
pete

blackcab said:

Some enterprising front end developer (TSim?) needs to add an "Am I or aren't I?" feature whereby you know that sometimes you're paper trading and sometimes you're trading for real, but the front end doesn't tell you which mode you're in, and toggles at random. Per trade or per hour. Per day might be a bit "ouch". Hey presto, the worst^H^H^H^H^Hbest of both worlds. Hope and anxiety yinging and yanging.

Alternatively, why doesn't a front end neurally netally analyse price immediately before your trades, and eventually start saying things like "Ooh, you sure about that? You know what happened last time. OK Cancel"

Click to expand...

Now there's an idea. If paper trading could give you the pain and pleasure of losing/winning without actually losing the ranch in the process...some sort of Pavlovian electrodes attached to suitable pain/pleasure receptors. One would soon stop jumping in at the first green candle...

I had a trading partner for a while who lost on 90% of all trades. Funny thing is he started copying me and still lost. Of course what I should have done is was fade his trades.

paper trading is essential

Paper trading is essential in order to test that your method works without the emotional content created by real risk of loss. If it does not work, then you have saved discovering this with real money.

When you start to trade for real, your task is to execute your method flawlessly. If you cannot, then you need to work on your psychology.

If you go onto the markets as a discretionary trader without paper trading, or any other kind of testing, you are just gambling blindfolded.

daxdaytrader said:

Paper trading is essential in order to test that your method works without the emotional content created by real risk of loss. If it does not work, then you have saved discovering this with real money.

When you start to trade for real, your task is to execute your method flawlessly. If you cannot, then you need to work on your psychology.

If you go onto the markets as a discretionary trader without paper trading, or any other kind of testing, you are just gambling blindfolded.

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Nobody disputes that paper trading is great for learning to push the buttons and to see whether we are going in the right direction re.our strategy. BUT IT'S NOT REAL. I've got a golf game where I beat Tiger Woods every time, yet I'm 18 handicap in real life. Jeremy Clarkson on Topgear last series drove around a very difficult US racing track in a great time on a simulator. Then he went to the real track with a real car and admitted that his pants would not stay clean for very long. He could not believe the g-force and the fear the real track produced in him.

rols said:

Nobody disputes that paper trading is great for learning to push the buttons and to see whether we are going in the right direction re.our strategy. BUT IT'S NOT REAL. I've got a golf game where I beat Tiger Woods every time, yet I'm 18 handicap in real life. Jeremy Clarkson on Topgear last series drove around a very difficult US racing track in a great time on a simulator. Then he went to the real track with a real car and admitted that his pants would not stay clean for very long. He could not believe the g-force and the fear the real track produced in him.

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No one said it was real, the point is that paper trading is not "pants". It serves a vital role in ones path to success.

We don't let anyone fly a jumbo, we put them in a simulater first, when they fly that good, they can try the real thing!

Can anyone say what the better alternative to paper trading is?

daxdaytrader said:

No one said it was real, the point is that paper trading is not "pants". It serves a vital role in ones path to success.

We don't let anyone fly a jumbo, we put them in a simulater first, when they fly that good, they can try the real thing!

Can anyone say what the better alternative to paper trading is?

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Now for some reason the counter argument always involves jumbo jets or space shuttles. There is a very obvious difference though. The people that are put into a simulator by BA or NASA are already the cream of the crop. I have a friend who has just got his commercial pilot's liscense. It has taken years and thousands of pounds and hundreds of hours of real flying time.
C'mon who wouldn't want to have a go in NASA's shuttle simulator, but getting them onto the launch pad would be another thing.

rols said:

Nobody disputes that paper trading is great for learning to push the buttons and to see whether we are going in the right direction re.our strategy. BUT IT'S NOT REAL. I've got a golf game where I beat Tiger Woods every time, yet I'm 18 handicap in real life. Jeremy Clarkson on Topgear last series drove around a very difficult US racing track in a great time on a simulator. Then he went to the real track with a real car and admitted that his pants would not stay clean for very long. He could not believe the g-force and the fear the real track produced in him.

Click to expand...

So just take it for what it is, it really doesn't need a great debate. I don't think there's anyone who believes that it can genuinely replicate real trading, but it is important to see how your strategy performs in real time. Assuming you have a winning strategy then a period of paper trading can help you build your belief & trust in it, which may go some way towards dealing with the emotional aspects of real trading, but there will still be a long way to go.

There are many aspects to succesful trading, and each needs to be worked on. If you try to use paper trading to address all your psychological issues then your efforts will be doomed to failure. If you use it to test your strategy then it may well save you a lot of time & money.

So no, paper trading isn't pants, it just has to have the correct purpose. It can sort out your entries & exits .... then it's down to you to sort out your head.

Simon

These threads keep popping up again and again, yet the "argument" goes on because the participants are talking about two entirely different rationales for paper-trading.

No one suggests -- or at least I hope they don't -- that paper-trading simulates live trading. How can it? Anyone who thinks that PT in and of itself is going to prepare them for live trading is going to be sorely disappointed.

This is not to say that PTing a new platform has no value. One should obviously get used to whatever it is he's using before trading with it "for real". To do otherwise is a waste of money. However, this sort of PT should take no more than an hour, if that.

All of this, however, has nothing to do with using PT to test a strategy, one which has been backtested and which is ready for forward-testing (preferably with replay). If the strategy holds up in backtesting and forward-testing, then one is ready to PT it "live" in real time. If it doesn't, then it's back to the strategy in order to determine the fault.

As for the PT in real time, the point of it is not to simulate live trading but to determine if the strategy continues to maintain its integrity. If it doesn't, then it sure isn't going to improve any if one trades it for real. If it does, then one can go ahead and begin trading it for real using small lots. If it then fails, one can look to oneself for the fault in addition to the strategy (though if the testing has been done properly, the fault is most likely with oneself).

In a nutshell, if one employs PT properly, PT will improve his results. If he doesn't, it won't.

See The Edge and Trading Journals, below.