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!
The following user says Thank You to Calming for this post:
Your going to get 1000 different answers and most will be correct but you need to figure out what works for you.
When I first started trading ( FX) I jumped straight in with a decent size account and rode the emotional roller coaster for a few years. If you're going to sim trade make your account the same exact size your intend to use,trading a $100,000 account when you will fund yours with 1k will set you up for nothing but issues. Trade sim exactly like you would real money get attached to that sim number, trade the same lot size, trade the same exact way nothing can change.
I think sim is very useful and can teach you a lot I'm currently back on sim until I complete a few things then will be going back.There's nothing wrong with trading sim the markets aren't going any where anytime soon so don't rush it. Some people here have spent years upon years sacrificing for trading so 9 years might not be enough or you could be an all-star and do it in 2 it all depends on the person.
And you can fund an account with $500 or $1000 to get unlimited sim though ninja I believe. The exact number is on the site.
-P
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Don't know if it takes 9 years, but yes, some years.
I lost my initial deposit ages ago. I am profitable since then. So I guess, nearly everyone loses his account at least once. Heard that often from my peers, too.
Yes, only trade an account you can afford to lose. BECAUSE YOU WILL PROB LOSE IT. Trade the least capital at risk possible per trade.
Don't expect to be a millionaire short term. Stories about ppl who took 10k to 100k in a month are made up (99%). If some of these stories were real, the next month they were broke. Because of the high risk they took in order to achieve a 1000% gain, at some moment in time their luck was gone. Trading is doing it with small sums over and over again. On and and on and on you trade. Don't shoot at the big home run. You lose, you win, winning points exceed losing points. Then one day compound growth locks in and you're made as a trader.
Start trading real as soon as possible. The learning curve steepens because you feel the pain. (Unless you're an automated trader, then you have to paper trade until your algo works. Then go online with real money)
Keep a diary. Keep the traded charts, study why you lost or won. Exchange your charts with the like-minded. Find a peer group via Internet.
Don't fear to admit you've been wrong. Discuss it.
Philosophy:
You are going to fit right in here
Everyone trys to outsmart the market at first. The real lesson will start when your patience has been eroded to the point where you question everything you think you know. If you are comfortable losing X and you lose it...what have you learnt about yourself? (I contend nothing of value)
This gig will catch you no matter how crafty you think you are being It is humbling.
Start a journal here.
All the very best.
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Paper money is only to learn to use a trading software. Dont waste valuable time playing with useless paper money. Trade real money if you want to become a trader. If you are afraid of losing you are not there yet. Only way to get out of that fear of losing is by losing. Do not even get into this business unless you have enough money to lose.
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Thanks for the ideas! Already subscribed to FIRE and practicing money and risk management. Can you recommend how to keep a diary and, most importantly, where to find a peer group?
My main purpose in starting my blog was to hold myself accountable. I knew that by doing so my trading would improve, because I finally made the huge revelation that I (my brain) was holding back my own profitability for one simple reason. I wasn't …
read this, there's thousands of traders on FIO send someone a PM or follow there journal most people are willing to help you after you prove you will put in the work and you're not looking for a handout.
-P
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I will say that ultimately paper trading/sim trading is great for two things:
1. Learn your platform.
2. Master your strategy/method.
The two things above paper trading will help you out with, however, as many others have said you must trade your paper trading account as if you were trading a real account. Therefore if you start out with 1k you must manage your risk as if it were a 1k account (Regardless if your paper-trading account size is 100k or 500k for that matter). Otherwise paper-trading will not be of much help to you.
After a period of paper trading, I would say a couple of months and you prove to be profitable, only then I would go and start trading with real money. But remember and this has been mentioned thousands of times on here, you must treat your paper-trading account as if it were a real account, stick to your strategy and your money management plan(s), in other words trade your plan otherwise you will be setting yourself up for failure down the line when you go live.
-bofh
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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.
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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A lot of excellent posts have been made on this topic already.
This one pretty much sums it up, in my opinion:
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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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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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.
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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it might be best to find some trading method that fits your personality... some guys/gals like slow markets and long term trades some like to be in and out in 30 seconds. Once you figure this out then you can try and grab some info from the members.
The following user says Thank You to MiniP for this post:
Depends how you define "scalping" but professionals that I know, and I do know a few real money professionals personally, don't scalp. One of the challenges with coming up with a scalping method is that when you go live with real money you end up being eaten alive by slippage and commissions. A profitable scalping method in sim ends often up going down in flames when you attempt to go live...but again...this all hinges on how you define scalping.
I am not saying that scalping can't be successful, but it is a very difficult road for sure.
Yea, I have never understood Al's terminology but in all fairness I have never studied it in depth other than reading threads and watching various webinars..many people on this site love him...that being said...when a leg of a trend takes a pullback is a description of price action and really has nothing to do with scalping. Scalping is taking trades with very small profit targets and very small stops. Some people will say 3 tick targets, or 4 tick, 10 tick, etc..is a scalp. Just depends on how you define "Scalp".
It seems to be close to a universal understanding. For Brooks, it's,
"... to a day trader, scalping is holding a position for one to fift een minutes or so and usually exiting on a limit order at a profit target in an attempt to capture one small leg on whatever time frame he is using for his trades. "
I read a book, where the author calls it a mechanical approach. You mechanically search for setups, enter them, and get out. For now, I subscribe to it, until I find something better.
Yup, I agree. It's the robotic nature of looking for, entering, managing, and exiting trades that removes emotions from the mix. Once you achieve that, you're on a different plane.
Yes, and the medicine that helps cure issues related to psychology is having trading a method where you know the win/loss ratio with specific entry, exits, knowing when your wrong, etc. If you take 3 losers in a row you still need to feel confident when you take that next trade that your trading a method that has been backtested that you have proven to yourself that works.
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I am a complete rookie who is making first steps and looking for some feedback from the fellow traders. Perhaps, I even find a mentor here. My preferred instrument is /ES mini futures. Quite possibly, some other beginning traders find my notes here helpful.
For …
Any advice on how to make it better and easier to read?
I just recently got back into trading. But I seriously paper traded for a good month before I started trading again. People who paper trade for a more than 6 months, I believe will never pull the trigger to trade live. For some reason those people are too scared. But definitely if you're a beginner, take your time to build a strategy. Trade that strategy for a good month or two, and if it works test it in a live account. I believe you learn the most in these markets when trading live.
To your question as of becoming a pro trader.....I think it's BS. No one really is a "PRO" trader. You're constantly learning and the markets are constantly changing.
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It is humbling.
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