Is Paper Trading Important?
Submitted: 13 Sep 10 15:40
 

Paper trading (or simulated trading) is vital for a trader to practice and test out in real time a strategy without the risk of losing money. It is also useful if a trader finds that he is losing his discipline and confidence, he can paper trade for a short period to regain confidence in his trading system and his ability to put on winning trades.

However, there are some traders who are always hiding behind the safe realm of paper trading and reluctant to start Live trading despite being extremely profitable on paper. The common excuse is often :I am not ready yet, so let me make sure I can make money from this.

He will never be ready.

The trader who thinks like this is immersing himself in self deception and wasting precious time and potential money. Trading is a very personal endeavor and being honest is crucial. In the case of the above trader, his problem is not about being ready but more of the lack of courage and the fear of being proven wrong in case he starts to lose real money.  Besides, as the paper-trader is trading with no stress of losing real money, he will tend to perform well. Thus, it is important that once the system has been proven on paper, we understand that the real ‘training’ starts from your very first Live trade.