Paper trading: Good? or Useless?

[bangzilla]

Hi everyone

Im brand new to the trading scene and ive started paper trading using quotetracker to develop a technique/style that works and get a list of rules down before I risk actual money, writing down my entries, stop losses before buying, and even using an imaginary buy button.

Ive read in "beginners guide to day trading online" that some think paper trading is completely useless while others swear by it.

i can see why it could be useless. For example when I fool around on a flight simulator on my computer i often crash into buildings for the fun of it, not taking it seriously at all. Also you could claim that there is no emotion involved in paper trading which makes it easier.

But if i take paper trading seriously, writing down all the numbers, and developing a set of rules that would eliminate most subjectivity/emotions in my decisions ,I think that it could prove pretty useful when i finally decide to switch over to real money

whats your opinions on paper trading?

 

[rols]

Is paper trading pants? was a very popular thread and there are many others...
http://www.trade2win.com/boards/showthread.php?t=19342

This subject has been debated many times and there are two main points of view

Yes it is a wate of time because apart from learning how to push the buttons and place orders it bares no relaton to the emotional roller coaster of real trading with real dosh.

or,

No it isn't a waste of time and people always bring up the flight simulator argument etc.

 

[dbphoenix]

whats your opinions on paper trading?

If you do it right, it's essential. If you don't, there's really no point.

If you want to know how to do it right, click the Journals link below my name.

Db

 

[bangzilla]

Is paper trading pants? was a very popular thread and there are many others...
http://www.trade2win.com/boards/showthread.php?t=19342

This subject has been debated many times and there are two main points of view

Yes it is a wate of time because apart from learning how to push the buttons and place orders it bares no relaton to the emotional roller coaster of real trading with real dosh.

or,

No it isn't a waste of time and people always bring up the flight simulator argument etc.

oh ok sorry about that ill run a search next time :cheesy:

 

[Charlton]

Hi everyone

Im brand new to the trading scene and ive started paper trading using quotetracker to develop a technique/style that works and get a list of rules down before I risk actual money, writing down my entries, stop losses before buying, and even using an imaginary buy button.

Ive read in "beginners guide to day trading online" that some think paper trading is completely useless while others swear by it.

i can see why it could be useless. For example when I fool around on a flight simulator on my computer i often crash into buildings for the fun of it, not taking it seriously at all. Also you could claim that there is no emotion involved in paper trading which makes it easier.

But if i take paper trading seriously, writing down all the numbers, and developing a set of rules that would eliminate most subjectivity/emotions in my decisions ,I think that it could prove pretty useful when i finally decide to switch over to real money

whats your opinions on paper trading?

Bangzilla

You seemed to have answered your own question quite well.

In summary I would say it is useful in the following respects:

• makes you familar with the broker's platform so you can move quickly and not make mistakes whilst live trading
• makes you look at charts, perform technical analysis and, assuming it also has either a live or delayed feed, helps you see how markets move - their velocity, acceleration, pauses for breath, levels, bids, asks, depth of market etc
• makes you start to think and develop strategies

It is not useful in the following respect:

• showing how emotions and being part of the herd can affect your performance

I would agree with DBPhoenix that it is essential in the beginning. If you feel you are getting something useful out of it, then you are getting something useful out of it.

However you need to remember it is not a substitute for live trading. Results when you go live may be very different to when you were paper-trading and you need to be able to adapt quickly at that point, not panic and take decisive and correct action.

Charlton

 

[blackcab]

You're not executing real trades, so how the market unfolds after your paper trade is going to be different to how it would have unfolded had you actually made the trade. If markets are chaotic systems then effectively you can't know what difference your trade would have made to the market. It doesn't seem possible that a one lot trade would make much difference, but who can say? And if you're paper trading big size then it certainly becomes significant. Personally I would do it, but more to get intimate with your trading platform than anything else.

 

[Charlton]

You're not executing real trades, so how the market unfolds after your paper trade is going to be different to how it would have unfolded had you actually made the trade. If markets are chaotic systems then effectively you can't know what difference your trade would have made to the market. It doesn't seem possible that a one lot trade would make much difference, but who can say? And if you're paper trading big size then it certainly becomes significant. Personally I would do it, but more to get intimate with your trading platform than anything else.

Absolutely - on thinly traded stocks looking at level 2 it is possible to see the effects from quite small orders. On NYSE in particular you can see a stock stagnating for hours and as soon as you place an order it comes to life.

Charlton

 

[dbphoenix]

You're not executing real trades, so how the market unfolds after your paper trade is going to be different to how it would have unfolded had you actually made the trade. If markets are chaotic systems then effectively you can't know what difference your trade would have made to the market. It doesn't seem possible that a one lot trade would make much difference, but who can say? And if you're paper trading big size then it certainly becomes significant. Personally I would do it, but more to get intimate with your trading platform than anything else.

If one is paper-trading size greater than what he'd trade for real, then he's missing the point of paper-trading.

In any case, for a beginner to trade something that would be moved by his trade is probably not one of the better ideas.

Db

 

[Hoggums]

Hi everyone

Im brand new to the trading scene and ive started paper trading using quotetracker to develop a technique/style that works and get a list of rules down before I risk actual money, writing down my entries, stop losses before buying, and even using an imaginary buy button.

Ive read in "beginners guide to day trading online" that some think paper trading is completely useless while others swear by it.

i can see why it could be useless. For example when I fool around on a flight simulator on my computer i often crash into buildings for the fun of it, not taking it seriously at all. Also you could claim that there is no emotion involved in paper trading which makes it easier.

But if i take paper trading seriously, writing down all the numbers, and developing a set of rules that would eliminate most subjectivity/emotions in my decisions ,I think that it could prove pretty useful when i finally decide to switch over to real money

whats your opinions on paper trading?

I am more fond of demo accounts if you plan to spreadbet. It's still open to the same abuses as paper trading e.g. no emotions, resetting the account when it goes wrong etc - but at least it gives you a real taste of trading and the pitfalls you may face.

 

[peto]

I am more fond of demo accounts if you plan to spreadbet. It's still open to the same abuses as paper trading e.g. no emotions, resetting the account when it goes wrong etc - but at least it gives you a real taste of trading and the pitfalls you may face.

I agree with your comment made in 2006:

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

. Saved me a bundle anyway!

 

[estrader50]

Paper Trading: Good!

In stressful situations you are prone to make mistakes. Paper trading helped my interaction with my trading desk (Futures-Trader) and charting software (Tradestation 2000i). I use the free paper trading account from IB to fine tune my trading system. Having the opportunity practice trades, to get you knows my trading desk, how to enter and exit trades in real-time, has been very helpful.
When the market is going against you and your panicing, it helps if know your software so you don't make matters worst.

 

[black bear]

it is for real, how real do you want it

paper trading is for real and of huge value IMO

goal

no paper trade result = no real trading for you boy/girl or your mad as a hatter = big pressure = reality check after all the hard work as been done and you still might not be good enough = total waste of ones time

I never experienced so much pressure in my life, failed at pretend stage = better get it nailed or pack it in = game over and not even started

probably thats why it took me so long to get round to it myself, facing up to the possibility of failure

better pretend and a waste of your time and a bit of than putting your house and family at risk imho

 

[Rhody Trader]

The advice I generally give new traders is to first use demo trading to learn the basics - entry & exit, p&L, orders, the nuances of your platform, etc. Once you've got that nailed I suggest opening a small live account - and I do mean small - just to do a little live trading so you can experience it. Having actually had real money on the line will teach you some things you can use when you go back to practicing in the demo and defining your trading strategy.

 

[northtreetrading]

The advice I generally give new traders is to first use demo trading to learn the basics - entry & exit, p&L, orders, the nuances of your platform, etc. Once you've got that nailed I suggest opening a small live account - and I do mean small - just to do a little live trading so you can experience it. Having actually had real money on the line will teach you some things you can use when you go back to practicing in the demo and defining your trading strategy.

I agree with Rhody. Demo accounts are useful for software and entry proficiencies, however they do not help a trader develop the disciplines necessary to trade successfully on a full-time basis.

Use the demo to learn the software and avoid unnecessary keystroke errors and then put a small amount of cash on the line to truly develop your trading skills.