re: papertrading and scalping
I have included a previous post of mine regarding paper-trading though I would rather call it something else...I still believe that demo trading can be a viable ingredient in the learning curve of a trader.
Post #5005
"Demo trading" is a fundamental step to becoming a successful daytrader. I believe one should "demo trade" for an extended period of time, not just a week or two.
One of the keys to successful daytrading is discipline - demo trading requires discipline to make it "act" more like real trading - if one can't adhere to a set of rules in demo trading, if one can't convince oneself to exercise the "discipline" to treat demo trading as "real" than I firmly believe they will start daytrading with a severe handicap - I would even go a step farther and state that to the extent that a prospective trader exercises the discipline to create a reality mode of demo trading - this "reality" directly translates into a measure of initial success they will enjoy in their foray into daytrading.
It is only common sense...and discipline - how can one not reap great benefit from going through all the steps and routine of trading (pre and post market research, stock screening, chat rooms, Level I and Level II, TA, charting, tracking, order entry, etc.) but one - the actual filling of the order - the only difference...and the cost is negligible, relative to the rewards of your new profession if you are successful.
Why would you not practice everything about daytrading time and time again with the only difference being the one thing that has the potential to cost you the most money -- an actual trade ... common sense tells me demo trading could and should be an invaluable resource for any neophyte trader, though it rarely is such a tool.
Regards,
Cormac
please, consider this just a premise and not a demonstrable truth - it will probably always be conjecture.
some additional comments:
IMHO, while execution/fills are key ingredients, their importance is relative to an individuals style of trading - I firmly believe that other steps in the process of trading are as important if not more so...and these can be practiced and planned thru demo trading.
I would be hesitant to recommend paper trading as in just marking your trades down on a piece of paper...I would recommend (minimum) subscribing to a non-executing direct access trading platform such as RealTick or even funding an acct and placing software in demo mode CyberTrader has the ability as does the Quantum Leap/TradeSharp/Sutton Online/Beacon/SpeedTrader platform, I am not sure whether TradeCast has a demo mode or demo acct you can "trade" from.
I think that in any of the platforms above you place your trade in real time, route and method of your choosing and then get your fill...all fills are not automatic in CyberTrader
Everything else is the same as actual trading, position and trade management...you can print out a your P&L, number of trades, % of shorts/longs, profit per trade, largest gain, largest loss, number of winner, number of losers...anything your software tracks in a "real" account.
I agree small lots can be used to get a certain feel for trading, but caution needs to be exercised...after all trading 100 shares is completely different than trading 1000 shares or even 500 shares and I have known a few traders that will rationalize a breaking of their "rules" when they trade in small lots - then filled with new found confidence they proceed to increase their share size only to find increased difficulty in entry/exits, missing a stop and falling into the well I might as well wait thru the next bounce...with disastrous results.
Discipline is the common thread to any successful style/method/technique of training/testing/demo-papertrading.
There are many manifestations of a lack of discipline that brings about failure regardless of the learning method...everyone has there unique success story but I would venture a guess that all surround a lesson that finally opened the traders eyes to the need for discipline in one form or another...what I don't understand is why it is necessary to lose real money and blood before lessons are learned...I am sure that most soldiers are thankful for simulations, war games and mock battles before the bullets become real.
I agree with LPS5's take on his equation for becoming a successful trader but only a limited number of such opportunities exist and that doesn't take into account family and lifestyle choices.
If ever there was a magic elixir for dealing with fear and trading, it would have to be reduced share size....I understand the premise but when is trading small lots the same as trading larger lots and do you really advise someone to trade 1000 shares with the same ruthlessness as they would trade 100 shares.
If nothing else paper trading makes the person develop something to start with and to some degree gives him something to compare results and reactions to. booters - I agree and fail to understand why more traders ignore the concept of practice...I know that many will say you just can't learn without real risk...again I fail to understand how trading is so different from any other endeavor/task/discipline that it would negate the benefit of practice...probably another instance of my naivet‚.
Eric - I like your post on testing strategy thru papertrading...perhaps we should delineate different styles of papertrading...one that tests and refines trading strategy...and one that tests and refines fundamental (respective to the individual) principles of trading.
LemonFlavor - re: your question on capital etc..I am a scalper and this is in part what I do:
I will use the amount of capital that is needed to purchase the optimum number of shares in the particular issue...if the stock is at $140 and I feel I can efficiently execute entry/exit with 1000 shares, so be it...with the immediate control I exercise in my trading I don't factor the capital used into my risk management...my risk is the amount of money I allow myself to lose, not the amount I am using...my risk is the distance in points that I allow a stock to move away from my entry before exiting multiplied by the number of shares.
re: multiple positions...frequently I will scalp two stocks and not think too much about adding a third...rarely will I open more than three positions but I have on very, very rare occasions had up to a maximum of five positions open...I will leave it to your imagination on how it all turned out : )
Sorry about the wandering and length of the post...I started it about 6 pm et and every time I sat down to write someone else had said something and then the kids would interrupt again
Regards,
Cormac |
