The old story of papertrading have been argued over a lot in the past. I cannot say what I do because that might be seen as advertising so I will start with the topic. Papertrading was never intended to teach anyone the emotional growth that is needed to be persistently profitable. Papertrading as we are using it is to test certain strategies according to a pre set of rules. The main purpose is to see if by sticking to the rules of a certain strategy and over at least 30 trades that strategy is profitable then it can be used. If going live with real money without any experience is like giving you a car to drive to learn you how to obtain your drivers license. The people telling you to do this is most probably also the people selling the cars to you as you wrote them off. Trading is like bushwalking in lions country. It needs skill and emotional strength to survive. The skill(how and when) can be learned through papertrading. Emotional strength to stick to the plan comes from taking tiny steps at first and growing in every leap taken. After 30 papertrades in a certain strategy the rules will be known by heart. YOU have to do the testing as you cannot trade on the historical success of someone else. At least more then 80% of the 30 trades must have been according to the rules of that specific strategy. By starting with real capital without a tested strategy the emotional pain of failure most of the times will scare you away from the market after you have blown your first account. Even if you are telling you that you have actually set that money aside as teaching or scholar fees. Loosing money hurts especially if it is hard savings money. If you have tested a certain strategy over at least 30 papertrades you will know the rules AND will know if that strategy is giving you an edge. You will also know if you like that strategy and if it suites your personality. By trading a strategy that is profitable but clashes with your personality will make you negative to the market over time and the market was never your problem. If you like what you are doing you will be successful in it. Make sure that the strategy you are using have a fix risk to capital exposure. ( I use a 3% risk to capital maximum per trade and per portfolio). Make sure it has a Risk to Reward ratio of more then 1 to 1,5. to your winning trades AND 1 to 1 on your losing trades(NEVER LOOSE MORE THEN WHAT YOU HAVE INTENDED TO) and a success rate of more then 50%-60%. No matter what strategy you are using if you apply the above rules you will at least start with good money management.
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