:: paper trading

before you risk any real money, try it on paper first. You will be glad you did!

You are now ready to start with a little "paper trading". Paper trading is simply day trading with 'pretend' money , i.e. on paper, hence the name. When paper trading stocks or any other instrument, a day trader should try to keep it as close to real life trading as possible.If you kid yourself, and are not ruthlessly honest with your paper trades, you might become overconfident, and then when you start day trading for real, you will be extremely surprised that it all suddenly seems so much more difficult. If anything, your paper trades should be even more rigorous than your real trades. What I mean by this is that you should assume you will ALWAYS get a bad fill (suffer 'slippage' on the trade - knock off a few cents per share every time) both when putting the trade on, and when taking it off again.

Of course, it goes without saying that you should be paper trading EXACTLY the same system you intend to day trade for real, and using the same instruments (stocks, options, futures, whatever you have decided on).You must use the same day trading systems you intend to use for real for another reason too - during day trading, the 'intrabar' volatility can be frighteningly large. Many day traders get stopped out far faster in real life than they ever do on their paper trades, because they kid themselves 'it didn't really go that low/high' whereas actually, yes sir, it did. You will also need access to live day trading market data while paper trading, as without it, you are simply fooling yourself. You need to paper trade for at least a month before you try trading with your real money. You must also learn to 'short' the market (i.e. sell high and buy back lower). If you don't you will be missing out on half the action each and every day. Many day traders never master the concept of shorting, but it really shouldn't cause any difficulty - it is simply the reverse of ordinary day trading. There are extra regulations regarding short selling, and your broker will explain to you these trading rules when you open an account. Alternatively, if you open a day trading spread betting account, you can short to your heart's content, with no extra regulation.

Back | Forward