Paper trading is… you got it right. You and a piece of paper. It can be done electronically. Yes, that’s the old way, there are a lot of forecasting tools on the charts now, like forecasting, but there is something so attractive and simple about paper trading. It’s a good way, really.
Take a notebook, a pen, sit in front of the chart and see how the price evolves. When your strategy points to a good entry, write down all the details of a potential trade, such as:
- account balance;
- the current price of the asset;
- expiration date;
- business size;
- and of course where you enter – Up (Call) or Down (Put).
All that’s left for you is to look at the graph, or you can leave it alone
When it’s time to expire, simply write down the current price and the new size of your balance, whether the prediction was correct or not.
In the same way, you can mark any other type of binary option, even “One Touch”, even “Corridor”. But, of course, in 60-second options you will have a hard time – time flies extremely quickly there.
That’s what paper trading is all about – you write down your trading data instead of risking your own money. They’re not redundant, are they? Of course. So why rush and mix them with the broker.
I don’t like paper – I understand, I’m a fan of smartphones and laptops myself. Therefore, keep records in Excel or a trader’s diary.
Advantages of paper trading
The advantages are obvious – money is not lost, you can open the graph at any time and evaluate the results of your exercises. Likewise, you can analyze successful things and learn to repeat that on the chart.
Yes, of course, many brokers offer demo accounts, however, don’t forget that these demos are usually provided just to get you hooked on this platform. Some brokers often open a demo after making a real money deposit.
Paper trading doesn’t demand anything from you. You only need to record your inputs sometimes, what could be easier, right? And, when it starts working, you can try the demo or immediately switch to the real thing, to work on a small one.
Disadvantages of paper trading
The disadvantages are obvious – this is not real trading and you can get too carried away with paper tests. Sometimes, on paper, everything ends well and you increase capital every day.
And then do you know what will happen? Yes, you will have a very interesting thought in your head, namely: “Isn’t it time for me to invest more money?” After all, everything ends, why would I take a stock and triple it in a week? If greed gets to your head, you’re going to have problems.
What is the way out of this – not to think that successes on paper are immediately transformed into real successes. It’s not worth the hassle. Theory is theory and practice is practice.
With paper trading, you cannot lose money. It also helps to eliminate, in part, the emotional factor, the continuous stress that we experience when it comes to working with real money. That we feel heart with so much difficulty. They are not surprising – after all, they are not easy to obtain and you want to increase them and not lose them.
“Trading” not paper
“Trading” on paper is the most elementary way to test strategies and develop trader discipline. This is an old, one might say, old-fashioned way. For decades, Wall Street traders took their notes on paper, even before the age of computers. So you almost feel like an archaeologist.
And work on paper as close to reality as possible. If you really can’t afford to work with more than 100 dollars in your account, work with it in paper trading. There is no need to play with millions, thinking that the paper will hold everything. It’s not like this. The simulation must be as close to reality as possible.
In the end, the main thing that distinguishes real trading from demo or paper trading is just the trader’s emotions. After all, the times and prices remain exactly the same.
