Paper Trading Vs The Real Deal

Discussion in 'Trading' started by jho, Apr 11, 2006.

  1. jho



    I am curious how everyone's paper trading compared to live trading. I have traded my strategy on paper and would like to get a feel for what I should expect. Greed, fear, and slippage.

    My average length of trade is around 5-90 mins. Using 5 minute charts. Nothing too volatile.

    Here are my guesses:

    Win% now: 70 [live: 50???]
    Average profit vs loss now: 4:1 [live: 2:1???]

    I could see making 1/5 of my paper trading results (if profitable at all). Do you think this is reasonable? How was your transition to going live?

    *there was a thread about this before but it didn't go into much detail, and I can't find it with the search function anymore*
  2. cwareing


    Just a question for you, where is a good place to paper trade? I am interested in paper trading in equity options. Could you recommend a free site?


  3. bitrend


    You can go here then click on Simulator to register. The problem with simulation is you got lazy and not excited. However, it's a pretty good site you can learn other stuffs as well.

  4. cwareing


    Thanks. I have been looking around this site, but there isn't really a forum for newbies like myself, is there? I hate asking stupid questions to members that have heard them a million times.
  5. MTE


    Depends on your strategy - pure mechanical or discretionary, but the difference is day and night. Emotions are on a totally different level in live trading.

    There's no point guessing, just go for it as being a great trader on paper means nothing.
  6. rols


    Paper trading is pants.
  7. romik


    check out the psychology forum, there is a lot of good information there for a novice trader. the main difference between real and simulated trading is psychological issues, which you have to be aware of prior to going live, otherwise the most likely outcome would be 1 of 3:

    1) You might lose some money and stop trading;
    2) You might lose a large %age of your trading capital very quickly;
    3) You might lose all you trading capital just as quickly as in point 2 above.

    Developing a trading system that works on paper could also create a negative performance in a live trading situation, that would depend on your actual experience, which I assume from your post you do not yet have.

    If your trading system is to be used for your own trading activity, I wouldn't be sceptical in revealing your criteria and asking as many questions as possible and try to welcome SOLID advice and keep testing again and again. Try to keep it cool on the forum, even at times when you get idiotic posters slagging you off, simply stick them on ignore.

    All the best.
  8. This is impossible to answer because nobody knows if your simulator will be the same execution platform when you go live.

    In addition, nobody knows if your simulating with the exact account size you will be trading with.

    Also, nobody knows how well your following your trading plan which is more important than your win:loss ratio.

    Further, nobody knows if your simulator trading environment will be the same environment you will be in when you go live trading.

    (ex. simulating trading for a few hours per day then you switch to live trading for 8 hours per day)

    (ex. simulating trading while you had a job to pay your bills and you don't have enough money saved up to pay your bills for at least one year while your live trading)

    (ex. simulating trading in one location and then live trading in another location)

    My point is that if your approaching your simulator trading the wrong way you will approach your real trading the wrong way (most do) and you may find it difficult to undo bad habits that developed in your preparation on the simulator.

    Therefore, most traders see a dramatic difference in their results when they go from a simulator to live trading in comparison to a few that don't see any difference...

    There's a reason for such and I've given a few of them above.


    Its absolutely critical that you only use the simulator provided by your broker or use a third party software that works with your broker for both simulator and real trading.

    To use a simulator by someone else that you know will not be the same execution platform when you do real trading is opening the door for a lot of trading problems...

    Such as execution errors and an increased anxiety while trying to learn a new execution platform with real money.

    The only usefulness for a simulator is to either learn a new trading platform, test a new method or your in the middle of trying to resolve a computer problem that you don't want to risk any real money while your trying to fix the situation.

    Also, if your broker doesn't offer a simulator or there's no third party software that can be simulated with them...

    You will need to practice with a small size only with real money and money should be put aside for such that's separate from the account size you will actually be using when you think your 100% ready.

  9. It really is totally different even if you have a mechanical system as many people won't take the signals with real money on the line. I'd say give it a try with small trades and see for yourself.

    In my experience, almost everyone makes money on paper. Very few make money in reality for the first several months. If you keep it small it shouldn't hurt though. Consider it tuition.

  10. nitro


    This is like saying you have read the "Joy of Sex", but now you want to hear from other people what it is really like to have sex and what you should expect. LOL!

    Do or do not - there is no try.

    #10     Apr 12, 2006