Home Add to Favorite Contact Submit  
             28 March, 2024
 

    
Category:  Articles » Reference & Education

 

The Top 10 Reasons Why It's Vital To Paper Trade

Popularity:
         Views: 1664
2011-02-20 01:25:31     
Article by Jose Ward

Before we look into the top 10 reasons why it's vital to paper trade before you invest in stocks, let's clear up a few things. First up:
What does it mean to Paper Trade?
To paper trade simply means to pretend to trade using real market data (and fake money) in order to practice trading before you begin. When you paper trade, it's like you're trading with paper money or monopoly money. You will trade exactly as you would if you were trading with real money, however you would only use paper money, (or fake money) hence the term paper trade.

When you begin to paper trade you will be given a fake monetary value in which to trade with. If you have your own trading software it's best to trade with a realistic amount of money (i.e. the same amount of money as you will when you use real money). The reason you do this is because if you paper trade with a realistic amount, you are more likely to make decisions as if you were trading with your real money. Another point, which you might like to take, is to treat the money in your paper trade account like you borrowed it off your grandmother and you're terrified of losing it.

Obviously you don't want to focus on being fearful of losing your money, (even though it is only paper trade money) however that is probably the closest example of the feeling you get when you trade with real money. I assure you there will be nothing that will prepare you for the feeling of trading with real money; that is something that you will develop when you get to it. That having been said, breaking through that fear is rather rewarding and the fear itself shouldn't put you off trading. Moreover, if you paper trade, you can get a feel of how trading works before you put your money in the markets.

The second thing we need to clear up before looking to paper trade, is that:
When You Paper Trade, You Must Take It Seriously
Even when you paper trade, every trade that you make must be made as if you were risking your real money. If you wouldn't buy XYZ (a fictitious stock) with your real money, but you have a hunch that it's going to go up, then you're not paper trading you're just having some fun. Everything you do should be exactly as you would do it if you were trading real money, except you are using paper money. Paper trade like you are trading with your real money.

Why It's Vital to Paper Trade
1. Learn the Markets: The number one reason why it is vital to paper trade is to give yourself a chance to learn the markets. I don't care how good you think you are, trading live (with real money) without taking the time to paper trade first is suicide. You need to be able to get an understanding of the markets and how they operate. Trading is not gambling; it is an analysis of probability and speculation.
2. Find your Strategy: Before you trade with real money, you need to be able to paper trade to find your strategy. How can you possibly know if your trading strategy works until you try it out for yourself with real market conditions?
3. Make Mistakes: The benefit of paper trading is having the ability to make mistakes. Every new trader makes mistakes, and I assure you, you won't be happy about making mistakes when you trade with real money. If you paper trade first, you are less likely to make mistakes that will cost you money and you will be able to control your trading much more.
4. Find your Habits: Every one of us has habits. Some of those habits can be detrimental to trading. If you paper trade before trading with live money, you can find your bad habits and iron them out. It's much easier to change your behavior and habits when you're not risking real money
5. Test and Measure: Trading requires you to constantly test and measure not only your trading strategy, but your mindset. The markets are always changing, and what works today, might not work in 6 months time. Likewise you need to test and measure your behavior as a trader. 80% of a trader's success is due to their mindset. If you paper trade, you can learn how to test and measure, and develop your skills to change quickly then you're going to be much more astute in the real marketplace.
6. Master your Mindset: Like I mentioned above; trading is 80% mindset and 20% strategy. There is more to trading than picking stocks, it is a mind game that you have to master, and unless you master it (or at least learn the basics) while you paper trade (before you trade with real money); you're almost guaranteed to lose money in the marketplace.
7. Learn new Strategies: The markets are never the same; they are constantly changing and require you to develop new techniques and strategies regularly. Even experienced traders will paper trade in order to test and develop new strategies or techniques. Every time you create a new strategy or technique you should paper trade it first to make sure it works.
8. Lose money: Part of being a successful trader is having the ability to lose money. Not every trade you make will be a winning trade. If you paper trade, it gives you the ability to learn that you will have losing trades without affecting your real results. You need to be able to deal with losing money, and know that another trade will be just around the corner.
9. Make Money: Although it might sound odd, some people have some pretty bizarre associations to making money. Often people feel guilty if they make too much money, or they have a buffer where it becomes too uncomfortable. You need to learn to accept more money in your life and if you paper trade, it lets you do that without risking any money of your own.
10. Get Consistency: Finally, the last reason why it is vital to paper trade, is to get consistent results for your trading. Anyone can make money in the markets, but only successful traders will make money consistently. Once you can make money consistently in the marketplace when you paper trade, you know that you can take it to the next step and make real money in the markets.

Specialized in: Paper - Trade
URL: http://qualityessay.com
Print article      Bookmark this page
Related Articles 
The Secret of Happiness: Satisfying These 4 Needs (Popularity: ): The purpose of life is happiness. If we are not happy, we cannot think of making others happy. A win-win situation is when we are happy and others are happy. If we are unhappy while making other happy, it is a lose-win situation. Being unhappy and making others unhappy is totally a lose-lose scenario.Happiness is a result of satisfying our needs. Selfish Needs We begin our quest for happiness by satisfying self-centric needs. ...
Landmark Forum Brings Major Transformation in Personality (Popularity: ): Upsides and downsides are the part and parcel of life, without which living is merely an ongoing stable experience. The joys and sorrows bring emotions that make life worth living. It is, however, different as to how people perceive their personal self and the manner in which they treat every situation they encounter. Where some people succeed in overcoming obstacles with ease, others struggle hard. In the latter case, Landmark ...
Landmark Education Facilitates Positive Approach Towards Life (Popularity: ): There are many individuals who put in great efforts to live a fulfilling and satisfying life. However, not all succeed in making the most of the opportunities that come across. Only a few fortunate individuals are able to make it big in their personal as well as professional life. The reason for most individuals to fail in reaching the zenith in their lifetime is lack of vision and confidence. You ...
There Is More To Know About Journalism Than I Thought (Popularity: ): When I decided to make freelance writing a career, I found that the best market was newspaper writing. I did not major in journalism in college, and really didn't understand Associated Press style as well as I probably should have. What I soon found out was that there was a lot more to know about journalism than I originally thought.One of the first lessons that I learned is that numbers ...
How To Effectively Use An Educational Rug In Your Classroom (Popularity: ): More and more teachers are learning the benefits of using educational rugs in their preschool and elementary classrooms. An educational rug is an area rug that features different basic concepts that are taught in the formative years, like ABCs, numbers, colors, shapes, measurements, beginning consonants, vowels, and more. There are even rugs that are useful in teaching pre-Spanish phrases and words, or math facts, like multiplication tables. Educational rugs can ...


Related Business 
NPTA. National Paper Trade Association (Popularity: ): Trade organization for paper, packaging and disposable products distributors. Buyers' guide. Distributor and retailer locators. Job opportunities. Calendar of events. Links to magazine, educational programs, and books.
Wholesale Fine Paper (Popularity: ): Rama Pulp & Papers Limited - India, Offers wide range of quality maplitho paper, thermal paper, copier paper, cream wove paper, multi layer carbonizing paper, mg poster paper and so on.
Pacific Paper Marketing (Popularity: ): Market, distribute and trade of paper and board. Includes a listing of global offices and company news and information .
Chung Rhy Special Paper Mfg (Popularity: ): Manufacturer of technical paper, art paper, household paper, medical use paper and food industries paper.
Ganyah Trading (Popularity: ): Wholesale trade of Mulberry (Saa) Paper Products and handmade paper frames from Thailand, as well as export of various natural handicraft gifts from around Asia.
The Fiberclay Council (Popularity: ): USA. Trade organization for the pulp and paper industry, dedicated to the promotion of industrial and consumer products manufactured from recycled paper wastes.
Vital Saunas (Popularity: ): Vital Saunas specializes in defining a healthier lifestyle through our luxury Premier and Elite infrared sauna models. We are committed to surpassing our customer’s expectations by providing top quality craftsmanship saunas at the most affordable prices in the market. Quality, safety, energy-efficiency and customer service are at the core of our company’s values.
Buy Vital Blood Pressure Monitor, Vital Bp Monitor Online in India (Popularity: ): Get huge discount on vital blood pressure monitor from healthgenie.in. We provide a wide range vital bp monitor at lowest price in India with Free Shipping & COD.
Paper Federation of Great Britain (Popularity: ): UK. Trade organization for the local pulp and paper industry. List of publications and events. Glossary of terms. Career opportunities. Links to related sites.
Agile Software Development (Popularity: ): Agile teams create business value by delivering working softwares at regular intervals. While doing so, they make design trade-offs in order to satisfy business reasons such as meeting a release schedule. Technical debt is the result of such decisions or trade-offs.