Paper trading? Good or useless?


#1

Hi guys. Happy to discuss with you a very needy topic. That some wher almost every one done. Or newtraders still doing this like me.
When i come to know that before you start trading u must paper trade First. Loosing paper Money is better than real one. So i started paper trading. For one month. In options. At the end i saw my frofit is almost 30% a month. I was on Everest. Now i have to put my money in account n start trading. But when i trade for real a month. I was in 5%loss .
What happens to my confidence of 30%. Then i go through my trades vs papers trade. I realised that one thing was lost in paper trade. That is FEAR N GREED Factor. Which makes my trade in loss. Number of trade was 3 times than paper trade.
I understood that trading for real only makes you a good trader. So keep trying with smalltrades small account. Rather than paper trade.


#2

Hi @Tushar_Tajane,

Kudos to you for not diving straight into trading with the hard earned money and rather testing the waters first with paper trading. I only wish more traders had the patience and discipline to do so.

Coming to your transition from paper trading to real trading, I think what you’re experiencing is very natural. You learned to swim in a pool and now you’re swimming in the ocean (with real sharks), so the dynamics are much different. But that doesn’t mean that your time in the pool was wasted; imagine jumping right into the ocean with no prior experience.

I have a few suggestions though:

  • Unrealistic Expectations - Don’t make the earnings from paper trade (i.e.30%) as a benchmark for real trading. It will only cause disappointment and to be honest, it’s very unreasonable to make that assumption.
  • Position Size - Now that you have started real trading, keep your position sizes small. So instead of taking full position, take 1/4th or 1/5th of that. This will ease you into trading and you can avoid that emotional “shock” of losing money
  • Give It Time- It takes time to learn trading because the texture of market changes all the time. For example, the traders who started in 2017 were like swimmers who learned swimming in a calm ocean but when they saw the rough waters of 2018, a lot of them lost their confidence. So, don’t let a couple of months of experience make you believe that you got it. You would need a good 1-2 years to see the cycles of the market.

Wish you all the best in your journey !

-Neha (vrdnation.com)


#3

Thanks for help. @Neha_Raghuraman My problem with real trading is i can’t see loss in position. But when paper trade is going on. I assume that it will recover soon. But in rael one i get exit too early. Cant keep patience. My prediction on nifty is almost correct but slightly trend reversals lands me in panic. :neutral_face:


#4

Losses are part of the equation, dear. Just keep them small and you would be fine.


#5

There is psychological difference in trading demo and live. With demo you are much more relaxed because you cannot lose much. With live account panic takes place. Try to compare your trades both on demo and live and see what are you doing differently. Try to fix it


#6

You can replicate your paper trading success to real life , just do the paper trading in mechanical way , set pre defined rules , set your own blue print ,… make sure u dont break that blue print and rules while u trade, start with small quantity .