Paper Trading, Paper Trading

I would like to discuss all aspects all aspects of paper trading here. Areas of interest include 1) opinions on the value or benefits of paper trading 2) any web sites that have paper trading available (especially real-time) 3) any experiences with paper trading 4) any other discussion about paper trading that you would like to post.

I have heard that around 90% of new traders fail in the first year and that half of those surviving fail in the second year. If this is true then maybe paper trading for awhile in order to get a feel for trading might help those statistics. For newbies and testing out new strategies it could be a $ saver.

Nothing can ever replace trading with real assets. However for testing purposes paper trading does make some sense. Nevertheless you do have to actually trade in order to make money from trading so you need to experience the market ups and downs. Your stomach will need to twist and churn from the losses and gains you have managed to get in order to be successful.

While I can agree that it is necessary to experience stomach churn and pain from the market experience in order to enhance the learning I am reminded of this old Chinese proverb that I think applies. "Better cautious at first then tears afterwards"

Does anyone know of a simulation trading site that has the look and feel of a broker ? I have found a couple of simulations that are interesting: 1) http://www.investopedia.com/ 2)http://game.marketwatch.com/Home/default.asp 3) http://investwithconfidence.simvesting.com/ Numbers 1 & 2 are delayed time which is an obvious problem if you are watching the market in real time. Number 3 is a real time simulation broker. However it charges a monthly fee (they have a free trial available). Paper trading can be done without the online simulation but that lacks the point and click necessary to keep the trade honest because its just like an actual broker in that if you step away (to go to the bathroom for example) you miss your entry / exit. The online simulation also allows you to use limit and stop orders that are automatic and the online simulation keeps track of your balance for you so it keeps it simple. The challenge in using a simulation is to trade the same as you would if you had real money involved.

Cosmo...do you know if the third one would be able to figure this out?

Say you had 1,000 shs of XYZ to sell...the bid is $15.00...but that bid is only for 500 shs...next best bid is $14.95...Would it be able to do the calculation if you put in a market sell fo all 1,000 shs?

IIC ... I don't know if the 3rd one could make that calculation or not. They have a contact Email on their web site and I have used that before. They are helpful and prompt in their replies.

THX Cosmo...I just wondered

A question just occurred to me about paper trading and it is this: what if you can't make $ on paper (paper trading) ? Do you then click on a trade using real $ and see how that goes ? One thing that I believe to be true about paper trading is that is is much easier to make $ on paper then it is in actual trading. That said doesn't it make cents to see if your trading strategy can make $ on paper before opening a position with your broker ?

I agree with that. But if your paper trading works I would suggest then trying it with smaller dollars before jumping in with the farm.

Try paper trading using Market orders and only place the to buy on the ask and sell on the bid (reverse for shorting)...keep the size of the trade respectable and with in the confines of what you 'could' trade out of your LIVE account. This is the only way to get real results that force you to be as least as good or better than the Market to generate profits. Yes, it may be 'just' a game but the results are just as real as the real thing.

I can sum up my thoughts about paper trading in one thought and that is: paper trading is a useful tool to work on strategy development and improvement without risking $ but is no indication of success/failure in the market.

Cosmo, I?m still not fine tuned as far as my plan goes. I did try paper trading and to me I did learn a few things, but then I realized new things are happening all the time. I?ve restricted to amount of capital for trading. I should rephrase this; I?m not buying hundreds of shares. I?m just getting my feet wet and I?m glad I started this year, because it has been a tough year. I needed some setbacks to keep me in check. Had I scored a big win off the bat I?d probably be cockier. If I had been in a nice rally where you can throw a dart and pick a stock and it run it would have done more damage to me then good. I view this season as a great opportunity to learn from making some real bonehead mistakes.

I will also say this, once I put up some cash my attitude changed.

very well said... i learnt that in stock markets when sometimes i made some $$, and many times lost $$