MD-doc Excellent post and excellent advice. To add to it I'll point out that the old mariners didn't have the advantage of paper-sailing. If they got in over their heads it was curtains. They had real courage. We can paper-trade, which is a real advantage, a valuable one that I'd recommend to anyone. Develop a system that contains entry criteria, exit criteria, risk and position size management. If it's profitable, then start trading it with real money, and NEVER violate your system rules.
One other thing about the sailors. They were prepared. You don't embark upon the high seas without a stout boat, supplies, a compass, and experience. You have to be prepared. Trading is no different.
this is the year 2001. forget about paper trading, get TradeStation, MetaStock or AIQ or whatever do your backtesting... otherwise u are bringing a kichen knife to a gun fight.
Papertrading can help in three ways (maybe more). 1. What worked in the past may not work in the future. 2. It will give you confidence to stick to your plan when trades *look* like they're going against you. 3. It can save the newbie. It's surprising how many trading schemes fall apart when put to the papertrading test. Several times I've developed systems, gone back over the data, and exclamed to myself "this actually works!" only to discover later that I had overlooked something. For instance, one of my setups for establishing long positions would buy first and sell when my profit trigger had been reached, but about half the time it would sell first (not short) and then buy later ! You can't do that in real life (unless you have a time machine) but it sure looked good in backtesting.
Rigel, Many thanks for your appreciation of my last post ! About paper trading, I do not share completely your opinions. I found out that, as long as it is not your money, the psychological gestures are never the same. My approach is rather, real life trading with minimum amount of shares ( 100 ). Only after you are certain of following up exactly, your trading plan, then one can go further, slowly and progressively to 300, 400, or 500. Careful, I am not saying that "paper trading" is no good, I am only saying that sometimes it gives you the false confidence, and a newbee will be rapidly confused. Thanks, anyway, for your post !!! MD-doc