r/Daytrading • u/Jackson1BC • 4d ago
Advice Paper Trading: Do or Don’t
I spent a few months paper trading on Schwab ThinkorSwim platform. Paper trading is a very deceptive experience for a newbie trader. You get 200k to start with. No matter how many times you tell yourself that you are treating this money as real money, it’s just not true. I consistently made $1-6K per day practicing completely irresponsible gambling as I discovered later. At the end I funded real account and jumped in. Boy is it different trading with real money, when you are green a few hundred bucks and then you are doing deer in the headlights impression staring at a loss of $1200 and revenge trading to get it back. Paper trading does not teach you risk management because you have no way of learning how to take a loss and cut it quickly, until you lose money again and again. You cannot learn how to trade correctly. You have to make real mistakes and then learn how to avoid them in the future. Then you get a shot at being a profitable day trader.
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u/KillerWhaleVentures 3d ago
Why didn't you practice risk management when you were trading? You should be trading as if it were real money.
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u/Parking_Note_8903 3d ago
You didn't treat the paper acct as if it were your real one, and then wonder why it felt deceptive?
reset the paper acct to w/e amount your port is for realistic gains / losses.
treat it as if it truly was your own money, your training value is only as serious as you take it.
Paper trading absolutely is a godsend to anyone new to trading, and exploring new strategies. You've done yourself a disservice.
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u/OptionSwingTrader 3d ago
Backtest instead, I use naked markets backtester, best one I have found for the money.
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u/researcheresk 3d ago
Agree. Paper trading is nice to help learn the software, your way around the market or things like your hot keys but ultimately it can hurt you. There's no anxiety and deep lessons learned...that I personally think make learning faster. Plus, the liquidity is sort of messed up. You can get in some trades when it reality you will be partially filled or filled higher.
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u/ama-tsu-mara 3d ago
Papertrading doesn't have anything tangible connected to it. There is no market psychology, its more like a game with infinite lives whereas real trading only has one. I never went with papertrading, I jumped in head first. Learned what not to do fast. Defining your profits and losses before you even enter a trade dictates the true outcome. Rather than shooting for the moon and hitting the floor instead.
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u/tofufeaster 3d ago
If you aren't paper trading to at least learn how to press buttons and execute trades that's on you.
I believe that if you can't execute your strategy with paper money and be profitable there is no reason besides luck that you would be able to with real money.
I think if you lack the discipline to paper trade while you learn your strategy before moving to real money it's a red flag that you don't have the discipline to be successful with real money. I believe that more than I believe paper trading is necessarily important. Using extremely small size and slowly grinding is basically the same thing too.
Daytrading usually takes years to become profitable so it's just statistically smart to limit downside in the beginning by using fake or small money.
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u/Mundane_Catch_1829 3d ago
Paper trading is essential. Teaches you the mechanics first of all and to test strats. Of course you have to trade live which is different but demo helps prepare for the next step.
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u/realFatCat1 3d ago
Boy oh boy you are wrong and are on a disastrous path. Let me explain.
-1st you didn't treat paper trading like real money even though you said you would and made irresponsible gambles. The fact is since you couldn't do what you said you would do on paper mean it will transfer to live trading, and clearly it did. If you can't be disciplined on paper then you can't be disciplined on live when you know damn well you shouldn't revenge trade.
-2nd this is not just a trade management issue. It's very evidently psychological. Irresponsible gambling is psychological. You lack patience, contentment, and calmness. Putting on trade after trade or sizing up irresponsibly to relieve the discomfort of sitting there and trading the right way. Putting on a trade when you're not suppose to or managing like shit is you being eternally uncomfortable. A trade or letting a loser turn around that should be a stop is a way to cope with the uncomfortable situations which gives you a slight feeling of relief. But in the end that just makes it all that much worse and then you're in a cycle of digging a big hole that makes you more and more uncomfortable, then you start to essentially gamble and not trade. I've seen it with other traders hundreds of times. You all make the same mistakes.
There's 3 components to trading.
-Technicals - like bar charts, order flow, indicators, any type of screen generated information.
-Psychology - you are part of the equation, you press the button. Your thoughts can make you or destroy you.
-Management - The tether between you - the psychological - and the technicals
-3rd management. We already see how you're the problem, not just management. However blaming paper trading for not teaching management is wrong. Astronauts go into simulation before going to outer space. F1 drivers use simulators between races. Commercial pilots practice on sims to handle emergencies. Trading is not different. You have no idea how to properly manage a commercial plane during emergencies, then the likely hood of you hitting the ground and blowing up increased substantially and that's your path right now.
You have to teach yourself management. You think live trading is doing it, but in reality the emotions are way more heightened which is bad.
The way you teach management is by recording the session. Reviewing those recordings, and tagging those trades. For example here is my tags:
Left line chart is management on my equity curve, Green are perfect managed trades. Red are basically impulsive trades and yellow are trades that needed a management adjustment. Which is what the right line chart is. This is all the yellow lined trades broken down further. I have things like I need to hold longer, too holding too much. Better entries, and flip hits.
Now that I have this data I attempt to improve it everyday. This is the game I play. How can I get to as close to perfect management as possible.
Then I screen shot all the trades and look at them through my book of charts. I label where I entered, where I exited and where I should made adjustments. I flip through them everyday like flash cards internalizing the setups. Visualizing trading them again.
I also do hypnosis sessions for the psychological aspect, and meditations during the review process to be calm and reprogram the subconscious mind to associate specific price action patterns with calm, patient, content trading.
This is the difference between professional trading VS gambling.
I'll tell you this. Everyone wants to be a trader until they have to do trader work. And you can learn how to trade like this on sim first. Once you get 3 consistent months under your belt - NOT TRADING LARGER SIZE - and respecting your DDs - Then you can go live. And it's perfectly fine to ebb and flow between live and sim when volatility shifts to learn how to adjust management.
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u/TomatilloEmpty 3d ago
Im paper trading for 3 years now and I finally seeing results! I found a good strategy and I learned how to properly manage my risk. Im ready to go real money with confidence. I’m using Trading View paper trading feature. I’ve started with 5K.