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From paper money to real money?


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From paper money to real money?

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  #11 (permalink)
Legendary Market Wizard
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traded on paper for about a year.

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  #12 (permalink)
North Carolina
 
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@Calming You can open a real money account and just trade in the simulator. There is a trade off between how long you trade on the simulator vs. going live. The trade off is due to the fact that the market changes and because even while simulated trading can be very accurate if done correctly, there is still information you cannot gain in the simulator, that you can gain from live trading. The trade off is largely a function of the cost to trade and the accuracy of the simulation vs. the live trading. Futures are highly leveraged with high costs for making mistakes. If the cost to trade live were less then there would be less reason to trade in the simulator. You should only trade with money you can afford to lose but you should, of course, strive not to lose.

Instead of focusing on becoming a professional: identify your strengths, resources, and capabilities. Define specifically what you will do, define ways to evaluate your progress, and work toward those specific goals. Achieve enough success at that whole process and you will be more likely to just end up as a professional.


Calming View Post
How long did it take you to switch from trading paper money to trading real money? Some say that one should trade paper for at least three months. Most brokers (systems) limit demo to two weeks. There is a possibility to continue but how long will they allow one to keep doing so?

One also hears that it takes 9 years to become a professional trader and that every pro lost an initial deposit at least once, so it makes sense to trade with an amount that one is okay to lose. Thoughts, ideas, suggestions, and philosophies are all welcome!


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  #13 (permalink)
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I'll just add that you can often get some great insights about the accuracy of your simulator / back-testing tools compared to the live market after trading live with a small sample size. You don't necessarily need to trade with a live money account wide open for weeks or months to validate that your testing tools are in the ball park. You can figure this out with a handful of live trades (5,10, 20, etc.).

The key items to be aware of are:

Execution speed Most retail trading tools assume a 0 latency (100% perfect execution speed) for backtesting and market replay.

Live SIM tools have built in latency times (You should be aware of what these are). This may be too high or too low compared to your live trading setup. So you should figure out what this is and be able to determine how your live trading time compares to this. 50 to 500 milliseconds of lag over hundreds of trades can make all the difference in results, so you need to know what these assumptions are and how they compare to your Live trading setup.

Live trading will have execution speeds based on a number of factors: (Location, broker, data feed, platform, etc.). You can tune these, and optimize your speed a number of ways.

If you have a decent set of testing tools but they assume 0 latency, you will be sorely disappointing when you trade live and hit 100 to 500 milliseconds on every trade for example. So rather than losing money live and wondering why it didn't match your testing results, try to solve for the lag differential so you can make your testing environment similar to your live trading environment.

In short I view trading live as just an additional step in the process of proving out your backtesting / SIM trading. Because you will need to validate the live trading latency against your testing latency at some point in the process.

Just another perspective to think about...

Ian

In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #14 (permalink)
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A lot of excellent posts have been made on this topic already.

This one pretty much sums it up, in my opinion:

MiniP View Post
Your going to get 1000 different answers and most will be correct but you need to figure out what works for you.

Most or all are correct, from different points of view. You can pick and choose the perspective that makes the most sense to you.

I would emphasize a few things, most of which have already been mentioned:

1. Don't bother with the 2-week demo offers. They give you enough time to get acquainted with the trading software, but not enough to get acquainted with trading. Open a small broker account (many will offer small minimums, check their websites) and then you can trade SIM without artificial time limits.

2. Until you have traded real money, your own hard-earned cash that you don't want to lose, you will have no idea what trading is like, or what it is about. No amount of SIM will duplicate this, unfortunately. So, use the SIM trading the same way that musicians use their practice, and do it to develop skill and technique in a format where mistakes can be learned from, but don't really matter. But don't confuse the practice for the real thing.

3. Trading with a very small balance is simply not safe, although it looks that way. If the account is too small, then you are seriously at risk of just blowing it out, and you also are very likely to be too afraid of losing it to make good decisions. (Yes, this conflicts with what I just said about opening a small account for SIM . But just as you should not stay in SIM forever, you should not cripple yourself with an underfunded account. If money is a big issue, you might want to look into FX currency trading, which allows very small dollar amounts to be risked, and/or the micro currency futures on the commodity exchanges. There are some trading journals on FIO by traders who are going this route. But the amount at risk needs to be relatively small compared to your account size or you will mentally short-circuit.)

When should you try live? Up to you, of course, but without it you will not be able to progress beyond a certain point. Scrape together or save some real money, put some into a live account, and, when you feel ready, technique-wise, put some into live trading. You will likely be horrified at how different it feels, but that's the point. Confronting the risk and reality of trading is not the same as a musician confronting the risk and reality of performing, but it is similar enough to make the point.

You can periodically go back into SIM for practice, but trading is actually done with actual money. Yes, by the way, you will lose something too. Try to keep your head and to learn from it. (Which is easier said than done.... )

Good luck. No one can tell you what will be right for you, but you can find out by your own experience.

Bob.

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  #15 (permalink)
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Calming View Post
How long did it take you to switch from trading paper money to trading real money? Some say that one should trade paper for at least three months. Most brokers (systems) limit demo to two weeks. There is a possibility to continue but how long will they allow one to keep doing so?

One also hears that it takes 9 years to become a professional trader and that every pro lost an initial deposit at least once, so it makes sense to trade with an amount that one is okay to lose. Thoughts, ideas, suggestions, and philosophies are all welcome!

Well, I would not go live until you can prove to yourself you can be profitable in SIM. If your profitable in sim, cut your winners in half and keep all the losses, are you still profitable. SIM is very different than live. Do you have a method that you trade ? Is it written down ?, Is it consistently profitable ? Do you know what your win/loss ratio is ?, etc. There is a lot you need to have figured out before you go live....or you can be like most others and blow out a couple accounts while you learn...but it is not necessary as a rite of passage.

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  #16 (permalink)
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Babool View Post
Well, I would not go live until you can prove to yourself you can be profitable in SIM. If your profitable in sim, cut your winners in half and keep all the losses, are you still profitable. SIM is very different than live. Do you have a method that you trade ? Is it written down ?, Is it consistently profitable ? Do you know what your win/loss ratio is ?, etc. There is a lot you need to have figured out before you go live....or you can be like most others and blow out a couple accounts while you learn...but it is not necessary as a rite of passage.

I forget who said this but it goes something like "trading is similar to ridding a unicycle down the street trying to keep your balance while juggling fire dogging on coming traffic all while there's a monkey dancing on your head " so that's what you have to look forward to.



-P

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  #17 (permalink)
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Babool View Post
Well, I would not go live until you can prove to yourself you can be profitable in SIM. If your profitable in sim, cut your winners in half and keep all the losses, are you still profitable. SIM is very different than live. Do you have a method that you trade ? Is it written down ?, Is it consistently profitable ? Do you know what your win/loss ratio is ?, etc. There is a lot you need to have figured out before you go live....or you can be like most others and blow out a couple accounts while you learn...but it is not necessary as a rite of passage.

Thanks for the input. A couple of follow-up questions.

What percentage of trades should be profitable in SIM to consider oneself profitable? Some say around 60%.

Where can one find examples of written down methods?

What else should one figure out before going real?

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  #18 (permalink)
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MiniP View Post
I forget who said this but it goes something like "trading is similar to ridding a unicycle down the street trying to keep your balance while juggling fire dogging on coming traffic all while there's a monkey dancing on your head " so that's what you have to look forward to.



-P

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I'd like to see a picture or video of that ;-)

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  #19 (permalink)
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The sooner you start trading real money the sooner you really start learning, simply as that

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  #20 (permalink)
Detroit, MI
 
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Calming View Post
Thanks for the input. A couple of follow-up questions.

What percentage of trades should be profitable in SIM to consider oneself profitable? Some say around 60%.

Where can one find examples of written down methods?

What else should one figure out before going real?

Well as far as trade percentage % in sim to consider oneself profitable will completely depend on the method being traded. Methods with 30-40% win rates can be successful because the risk to reward ratio is very high. Different trading methods have different parameters regarding risk reward ratio's, win rates, etc.

Regarding examples of written down methods, well I wish I had that....lol. They are out there and probably on this site if you look at the trading journals. This site is a great resource for new traders.

Well, you need to come up with a method or work with someone already successful, start with a single trade type, have it written down, work through the math and factor in commissions and slippage, trade in sim, get profitable in sim, and when your ready consider going live with 1 contract (all in all out).

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