How long should you paper trade before trading with real money?

Discussion in 'Trading' started by JeffUSA, Feb 19, 2010.

  1. JeffUSA


    I am paper trading two systems I have developed and both are doing good after a month. How long do you think I should paper trade them until I start using real money? Any good free or cheap software for doing backtesting?
  2. Jeff,

    I would try NinjaTrader for free backtesting or also AmiBroker, excellent and very cheap.

    I personally use Trading Blox but that would not fit in your requirements of being cheap (although it is excellent)...
  3. you should probably paper trade until you are routinely profitable. "Later" and "no hurry" are always a good idea in trading
  4. If they are automated. 1 month is good as long as you have 12 Mos proven backtesting.

    If not automated it depends on your experience, system, rules and backtesting.

    An experienced trader should be fine with 30 days as long as the system isn't new ... just an evolution of experience.

    If it is brand spankin new ... then it requires much more certification as it is not built on an evolution of experience.

    Good suggestions:
  5. OEC ( will give you a free futures trading simulator but it only lasts for 2 weeks (then you gotta register again with a different email addy).

    You can also trade forex on their system but they whitelabel GAIN so I wouldn't recommend it unless you like losing money.

    But for futures they're good, and their trading interface is the best I've ever used (I mean the way you place/modify/cancel orders).

    You can use other charting programs, such as SierraChart, with OEC's data feed.
  6. Jeffp


    One test I complete, for new strategies is the "Stress Test": doubling the account size i.e...100% return, using no more than10% equity for each trade with 1% max stop loss on any one trade. The last one took two and half months...and a lot of focus and hard work.

    I use Ninja as well and track the stats on all my strats...this helps me tune my risk reward.
  7. These are ridiculous claims. 30 days does not PROVE anything - Jef, you should ignore this assertion. unretired is nota particularly knowledgeable trader.

    At 30 days, it is barely out of diapers.
  8. wst


    The key is to start small and scale in slowly. You may start with a small amount like $1000-$3000 and for each profitable month that increased the equity you add some more to the available pool of equity.
  9. Forget about most of what you hear. The objective of paper trading is to validate the system, see if there are any programming errors and more importantly to get aquainted with the platform and its requirements.

    Paper trading will not tell you much about future performance of trading systems under real market conditions. There are so many factors involved in real counterparty transaction situations, known and unknown, that any speculation about future performance based on paper trading or even backtesting is largely unfounded. Backtesting has great value for determining which systems not to use. Backtesting can only estimate the probability that a system will perform well under real market conditions but often this number is useless.

    Instead of paper trading, actually trade the systems with a minimum position size.
  10. 1. You do lots of backtesting.
    2. You paper trade and get good results after a month.

    How long do YOU wait before using real money (w/ an ATS)?

    Are you thinking some profound insight will magically appear
    after steps 1 and 2 above (from another month of simulations)?

    #10     Feb 20, 2010