Futures For You by Carley Garner
THE JOYS OF PAPER-TRADING
How long should novice traders paper-trade before getting involved in the markets?
The benefits of paper-trading significantly diminish beyond a couple of weeks. In fact, those who spend months (or even years) perfecting their skills in a simulated trading account are likely getting more entertainment than education.
The bottom line? Trading success is largely determined by mental stability, but unfortunately, paper-trading excludes the psychological aspect of the game. As a result, the practice fails to provide traders with a realistic account of their skills. For instance, a successful paper-trader might be proficient in technical analysis and fundamental research, but if he is not capable of managing his emotions, the success enjoyed in a simulated account will not carry into live trading.
The difference between a simulated account and live trading is that there is actual money involved in a live account and, therefore, risk of loss. Along with financial risk comes psychological challenges; a less obvious difference between simulated and live trading is that making rational decisions with what is essentially Monopoly money can be done relatively quickly and efficiently. Yet, when there is hard-earned money on the line, the mind has a tendency to play tricks on traders as fear, greed, and frustration breed pressured decisions.