Paper Trading Your Way to Real Profits

Edward C. Turner        Patience is a virtue, and when it comes to a simulated paper trading account, these words of wisdom are worth applying to your future trading life.  Here’s another word of wisdom: “Do as I say, and not as I did;” because as a beginner, I thought “demo” trading was meaningless, and I jumped out of the educational gate trading with real money.  Add to that the fact that I had success! My first three trades netted $79.00 in profits, which I promptly invested in a desk for my trading monitor. So, let’s see here: no downtime, no practice, and profits to boot. Not bad, right?  Well, maybe not so good. What if those three trades were supposed to total $1,500.00?  Let’s discuss some merits of starting with a practice account.

     When learning to trade, paper trading will help keep “second best” out of your trading room, equip you with the highest of potential profitability, and make the transition toward becoming a real money trader much easier.  Besides, you have new avenues of learned plans, methods, methodologies, ideas, and concepts to explore; wouldn’t this be better served without the potential emotional risks of large draw downs in your brokerage account?

      Another big advantage for paper trading is the ability to flex your trading muscles by building up proficiency rather than profitability. People are always telling me about their humungous profits with their simulated accounts; however, this may be a huge mirage. If you buy 200 standard lots to achieve these results in your forex account, one has to ask, “Was that indicative of how you are going to trade when you go live?”  No, of course not. Always use in your practice account the same procedures you will be using with your live account. That just makes common sense, and besides, this will give you an advance start in working with risk- reward ratios and proper money management. Remember, the focus here is not on how many profits you can make in a session; the focus is on honing your skills and on equipping yourself for a future of successful trading.

     Last, a simulated account is a good location to check out your emotions. After all, if you are going to be upset, have sleepless nights, and battle anxiety over paper money losses, how are you going to react to the real event? Putting your emotions in check now will help keep ugly habits out of your trading room down the road.

   Back then, I was wrong. Simulator accounts are not “meaningless”.  Plus, they have the added advantage of shortening your learning curve, curbing future troubles right in their tracks, and allowing you to take the time to find consistency with your trading.  Consistency is your friend in the live world of live trading. Time to call your broker?  I vote “yes”, how about you?

About the Author Brian Keith


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