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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Dan Clark who wrote (8871)	6/12/2000 5:35:00 PM
From: OZ	Respond to of 18137

I agree with your post 100% Dan. I think the real value of paper trading is for the newbie dayrader. I also think it could be used by the experienced trader in VERY extreme cases where fear has taken over and they are almost out of the game. I do believe that the other Dans comments were being directed to experienced traders having problems as opposed to the newbie wanting to be a daytrader (which was the context of the question). I went through a 4 week long continuos pullback in my P&L and was feeling like I had lost it. I was about to start paper trading again because the feeling was so severe. Instead I reduced down to 100 (very expensive stocks)to 200 lots. I found myself frequently making 20 to 30 points on the 100 shares. It was easy to be "ruthless" with the smaller lots. Eventually the fear was replaced with the "what if I had 500" feelings. It only took 2 weeks of this and then in the next 5 weeks made a return of 94%. If ever there was a magic elixir for dealing with fear and trading, it would have to be reduced share size. OZ

To: Dan Clark who wrote (8871)	6/12/2000 6:07:00 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 18137

Dan, If a trader has chosen a trading plan that is NOT successful while paper trading, they can't hope to succeed in live trading. This point is well taken, but I see two problems with it. First is denial. A hopeful, wannabe trader can come up with all kinds of excuses why paper trading is NOT successful, including the old "I wouldn't have done that if it was real money on the line. I'll just ignore this 2 stick loss here and add up my winners. I won't make THAT mistake again, so it doesn't count." And second is the fact that almost everyone gets to the point of "making money" on paper, often doing things they either cannot or will not do when trading live. Along the way they are likely to develop bad habbits that will be broken later at great expense, or not at all. I don't doubt there are some highly disciplined people who can go about this the right way and benefit from this first paper trading step. I firmly believe it's a small minority. Commissions and slippage can eat up your account even with small positions. I don't expect all of you to agree with me, but far better to suffer this in a small way early instead of in a bigger way later, IMHO. I suggest testing each trading plan by paper trading. If successful, follow that with live trading small positions, followed by larger positions. For someone who has experienced the real market and is testing a new system or plan I agree this is a good approach. I still don't think it's the right way for someone who has never experienced real world slippage, being in the money in a trade and having it turn into a loss after repeated failed attempts to get out, then deciding the worst is over and waiting for the rebound, only to have the cycle hit again, ultimately paying through the nose for holding out too long for that one last teenie. These things don't happen to paper traders who play a see a quote hit a quote game. I will say that there are some places where you can do more realistic "paper trading" like some of the online "contests". Some of them give delayed "fills" so you don't get used to thinking every price you see is the price you get. The problem there is it's too easy to dismiss that "reality" element with the idea that in the "real world" you would have gotten that one, and too easy to hold on to things you should have stopped out of because chances are they will come back. Often they do, and no one really suffers when they don't. I think I've said my piece on this issue, so I'll just respectfully agree to disagree with anyone who has a different view. Dan

To: Dan Clark who wrote (8871)	6/12/2000 7:17:00 PM
From: Eric P	Respond to of 18137

I think that it should be a three step process. The first step is paper trading, followed by your two steps. If a trader is a newbie, and hasn't developed a good trading plan, they will lose a significant amount of money just trading small. Commissions and slippage can eat up your account even with small positions. Just because a trader is successful with paper trading doesn't mean that they will be successful with live trading. But... If a trader has chosen a trading plan that is NOT successful while paper trading, they can't hope to succeed in live trading. I suggest testing each trading plan by paper trading. If successful, follow that with live trading small positions, followed by larger positions. Right on, Dan. I agree completely. Why waste real money on an untested 'system'? If the methodology is successful, there will be plenty of time to reap the rewards later. While a 'newbie' is in the learning process, the key is not to make (or LOSE) big bucks but to learn the basics and begin to formulate a successful strategy for themselves. Paper trading, IMO is a very important element of this for most new traders. High rollers and Bill Gates can probably skip this paper trading step, as the losses may well be unimportant to them. But for the rest of us, it's the best way to get an Ivy League education with a community college cost... -Eric