Paper Trading vs. Real trade
With nothing at stake, you can show that you succeed in a position in securities trading, because the psychological element is largely kept in check. Whatever trend following procedures and indicators of technical analysis you use, you are able to apply without emotion. To the best of your preparation, make a decision to get a position. If you see your position at a loss and is on the wrong side of the trend to close the position. There is none of the psychological game, use the people in the trade with real money, where to justify it, that it is only a “paper loss”. And if you are actually on the wrong side of the trend, this paper loss is an even bigger waste of paper and your next psychological game says to keep you, these paper loss until they recovered around. Now you are losing time and have become a longer-term trader than you first started as.
So, you have graduated from the paper trade school. Your credentials are excellent. Your track record is very good. You have the confidence that your methods and systems to work. You have proven that you exercise discipline. But you will be able to exercise the same power in real trading? Can you suppress your feelings, if it be for real money?
In a conversation with my son, who thereby simulated stock trading in an accounting class, I learned that he. Leader in profits for the second time running In his short time with securities trading, he has learned very quickly, the same things that me to learn more in trading with real money. I asked him how he made his entry point decisions and he said he looks at the general trend of the market are traded together with the trend of the stock. He has a general idea that the company behind the stock on firm ground with good fundamentals. He makes short-term trading. When he sees his position in the red, he immediately sold. If it does not, that is the case, he makes money for his positions he sold quickly to take the gain.
Not meaning to stifle his enthusiasm with his great findings and conclusions, I have pointed out that the psychological factor is what ultimately hinders trade with real money. When I told him that people end up in paper loss scenarios, he replied only in the typical youthful zeal that it’s just a cover for a situation that should not be. It states logical “only the position to close, and take the loss.” Of course, he is right.
When I was the point that emotions get in the way when it comes to real money, and that it tends to be very hard to overcome their own emotions, the next logical answer he gave me: “I see myself go to the casino and win at blackjack, and I want to do before stock trading with real money. “His point is that blackjack is more calculated and deterministic. I’m not conjure up the idea of stock trading as equivalent to casino gambling (although others have done).
In addition, I did not get into the discussion about the need to suppress the same emotions at the casino blackjack. But suffice it to say, the psychological factor with real money must be kept in the conversion from paper trading to trading with real money.
Copyright March 2009 StockTradersPlace.com