How To Paper Trade A Stock Trading Strategy

by Dilip Shaw Date: December 22, 2017

in Stock Trading

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Its is very important for traders to start researching a strategy by paper trading it. But there are some points that should be kept in mind before they start paper trading.

In this article I will discuss what are these points that they should keep in mind before they start paper trading.

What Is Paper Trading?

It is not a real trading. Trades are not taken in a trading account but the trades are written in a piece of paper or an .XLSX file.

In paper trading no real money is involved. So there is no risk involved. However still there is a risk – when paper trading there is no emotion involved plus usually when paper trading traders do not look at liquidity of options.

In this article I will discuss the best ways to paper trade stock strategies.

Try Paper Trade in as Many Strategies as Possible to Save Time

You may read many strategies and find some interesting. Note down the one that you may find interesting and start paper trading. After a few days if you find another good strategy do not waste time paper trading it. Some people have this habit of waiting for one paper trade to finish then start new paper trade a strategy. If you do this you will waste time. Since no money is involved you can paper trade 10 strategies at a time. This will save enormous amount of time and you can get a good strategy soon.

Paper Trade in At Least 10 Lots

Since no emotions are involved it is recommended that you trade with at least 10 lots. When your paper trade will show more profit and loss some emotion will be involved. That said do not forget to write the margin block as well. You should have an idea of how much money will be required if you go on to trade with real money.

Learn TO Manage Risk

If your trade goes against you feel the emotion to save money and try to manage risk. Do not leave the trade as it is just because it is a paper trade. Practicing risk management will help you to manage risk when doing real trading.

Do Not Have Unrealistic Emotions

Trying to be emotional while paper trading is fine. But do not get over emotional. The emotions of trading real money are completely different from paper trading so keep this in mind. If you get success do not be overjoyed and if you lose money in a trade do not write it off as a paper trade. After all you took a trade and made a loss so be realistic and study your mistakes in the trade.

Get Your Order filled at LTP

Do not write the best possible rate when paper trading. Write the LTP – Last Traded Price. LTP is the price at which the last order took place. This is the real price you will get when trading.

Respect Your Trading Plans

Once you have written down a trading plan do not change it in between once you have started the trade. Respect your stop-loss, profit taking plan and risk management plan else you may end up making nothing out of paper trading. All your research will go down the drain.

Conclusion

New novice traders must do research or paper trading any strategy before taking the plunge. But they get too greedy and start real trading without doing proper research and lose money heavily.

However, it should not be done for too long else you may end up only paper trading for years. Once you get a good strategy start with lowest margin block to get a feel of the strategy in real trading.

I did one year paper trading. From mid 2010 to 2011 I only did paper trading to develop some strategies that are very conservative in nature and very capital safe strategies for the long term.

Yes using my course strategies you will not become rich overnight but it will help you generate good monthly income to live a good life a few years from now.

You have to start today else you are just wasting time and money doing speculative trading.

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About the author: Dilip Shaw I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.