Paper Trading your system- Is it needed?

[columbus]

When it comes to trading, there are two things that I do NOT believe in -

1) Paper Trading.
2) Back Testing.

What Paper Trading is missing Emotions and Money Management.

 

[_Phantom_]

When it comes to trading, there are two things that I do NOT believe in -

1) Paper Trading.
2) Back Testing.

Main issues with paper trading a trading system -

1) All trading systems will work well during certain market cycles and won't work well under certain conditions. You will most probably jettison a perfectly logical trading system because of poor results when you are paper trading. Or you could adopt a flawed trading system just because it did well during the 90 days you paper traded that system.

2) All great (and semi-great ) traders mention that success in trading comes from keeping emotions in check, position sizing, money management, risk management etc - which are all long term in nature. A trading system apparently contributes only 20% to your success.

I somewhat agree, because even a simple trading system -

View attachment 19234

BUY when Nifty crosses 20 SMA line
Square off long position & SELL when Nifty goes below 20 SMA line
Square off short positon & BUY when Nifty goes back above 20 SMA line
.
.
and so on will be profitable in the long run.

But execution of the strategy is the KEY, which your 30 or 90 day experiment in paper trading will not show.

Hi smartcat,
1.Yes, i agree with you that market moves in cycle, sometimes market makes u feel like a Rockstar(good cycle) and at times make u feel like a idiot(bad cycle) and based on the type of trader you are, the duration of cycles varies.

For eg. I am intraday trader and I take trades based on 3min and 5min chart. So for me, the duration, bad cycle generally lasts is no more then a week. So, u have to paper trade your system for an extensive period(which should include both good and bad cycles) depending on the type of trader you are. The sample obtained should cover both the cycles. What i would suggest that system should be paper traded not based on number of day but based on number of samples of trades(wherein each sample should cover specific number of trades for eg. say next 50 or 100 trades)

2.Yes, absolutely smartcat, without these, no system can be complete. With correct implementation of MM in your plan. This is the thing which keeps me in green inspite of being wrong 70% of time For me trading is not about being right. Why do i need to be right if i can make money being wrong most of the time? :rofl: This is where MM comes into action. I don't want to go deep within this topic and stretch this. Yes, the rewards are long term for sure. I am comfortable in making consistent money with long term perspective, rather then quick money.


I know many would have conflicting views with mine, but this is what has worked for me so far and i would rather stick to it. :thumb:

Thanks.
Phantom.

 

[DanPickUp]

Success in any paper trading shows you the skills you do not have in real trading, as it is only a could be success and not a real success.

Paper trading is a learning tool which can be replaced by demo accounts which give a far more realistic idea about what you will face in trading, even it is a demo account.

Still, it is not a realistic view, but as knowledge is in the long run part of our success, we sometimes can use it for a short while. If we use it on a long term way, we probably never will make it to real trading, as there is always some thing to adjust in our trading style and this is finally better done in the real market and not always on a bla, bla, bla paper trade.

 

[_Phantom_]

Agree with smartcat......:thumb::thumb:
Emotional component and money management is the major decisive factor between success and failure.

Most trading system will work in trending market and fail miserably otherwise.
The "non-trending" or the "range bound" phase can last longer than one's account or pain threshold.....:rofl::rofl:

Yes Giraffee,

From the little knowledge that i have, i believe that Trading comprises of emotions(60%), MM(30%) and System(10%)

So Emotions(psychology) plays an important role and separates the successful from the not so successful ones. And this is responsible for gap between Expected and Actual results according to me. I may be right or may be wrong but this is what works for me.:thumb:


As i stated in my above post that at times market makes you a Rockstar and at times an Idiot. So what separates you from others is how you kill the markets when in Rockstar mode and how you loose smart when in idiot mode.
This is where my position sizing rules comes into play. I would refrain from going in details about my rules for time being as this is not the right thread to do so.

Thanks.
Phantom.

 

[Giraffe]

This is my personal view.

I have been intraday trading for almost 3 years and I have noticed that what ever orders you put or have in pending status, there is someone out there that knows your exact position in the market. They simply use the power of money to pull the market against you. Be it short time trading within 3 mins or long time trading like 2 to 3 hrs.

For example, consider the main owner of you brokerage house. They have several people trading in their provided software.

1] Who knows what logic their software runs on the inside?
2] Why would the owner of the brokerage firm not want to know your position in trade and profit from that?
3] What if the brokerage firm that you have is actually manipulating the share price in order to make profit for themselves. They have huge amount of money to move the market in which ever direction they please.
4] Loss is always possible in a side ways trend because they can exercise their power of money effectively at that particular time.
5] People are brilliant, but never have I seen anyone making consistent profit or any one boosting their kill in the market. Why? Is there some kind of internal sly game played with the common man?
6] Why is you broker always eager to give you tips?? Why does he always insist that you listen to his tips?


The possibilities of fraud are immense in stock trading. No one speaks about it as eveyone concentrates on finding a method that works in earning money. But yet they loose money. What should be the logical outcome of this?

:thumb::thumb::thumb:
We all aspire to be this "someone" one day pal......
BTW, isn't this the case in almost every sphere........

You reminded me a scene from the movie Layer Cake (starring Daniel Craig)
You can watch the movie, or if want it the shortcut way the scene is here:
http://www.youtube.com/watch?v=2U4aCMIBYSY
One of greatest words of wisdom in movies...:thumb:

 

[_Phantom_]

Success in any paper trading shows you the skills you do not have in real trading, as it is only a could be success and not a real success.

Paper trading is a learning tool which can be replaced by demo accounts which give a far more realistic idea about what you will face in trading, even it is a demo account.

Still, it is not a realistic view, but as knowledge is in the long run part of our success, we sometimes can use it for a short while. If we use it on a long term way, we probably never will make it to real trading, as there is always some thing to adjust in our trading style and this is finally better done in the real market and not always on a bla, bla, bla paper trade.

Aah Dan, You had hit the right node.:thumb::clapping: This is what i meant to say. Paper Trading gives the potential of what we can expect from our system by following rules and MM, minus the emotions. Then next is to start with small capital and keep on improving ourselves(emotions included this time) with a target to achieve the results we got from paper trading(not exact results but somewhere near.)This takes a reasonable amount of time and efforts though. :thumb:

 

[_Phantom_]

This same thing applies to investing aswell man! Chill maar........



Your 19 too?!

Yes Mr.G, From the same club!

 

[DanPickUp]

Aah Dan, You had hit the right node.:thumb::clapping: This is what i meant to say. Paper Trading gives the potential of what we can expect from our system by following rules and MM, minus the emotions. Then next is to start with small capital and keep on improving ourselves(emotions included this time) with a target to achieve the results we got from paper trading(not exact results but somewhere near.)This takes a reasonable amount of time and efforts though. :thumb:

Well, your avatar looks annoying and you seem to have a bit more knowledge compare to what your thread title shows. A little add has to be made to your very well explained above post: In paper trading we also do not know the real filed of our what ever placed orders in the real market and that will have a certain impact to our profit or loss outcome of any trade made with real money.

Take care and why not change such an annoying avatar to a less annoying one? DanPickUp

 

[carbonway]

:thumb::thumb::thumb:
We all aspire to be this "someone" one day pal......
BTW, isn't this the case in almost every sphere........

You reminded me a scene from the movie Layer Cake (starring Daniel Craig)
You can watch the movie, or if want it the shortcut way the scene is here:
http://www.youtube.com/watch?v=2U4aCMIBYSY
One of greatest words of wisdom in movies...:thumb:

Well, you know there is a lot of Sh*t to be taken to be that someone one day..:lol:

Thanks for linking me to that movie. I am gonna download it today and watch it tomorow afternoon.

Here is the striking script...:thumb:

-----------------------------------


Are you enjoying this?

No. On the contrary.
Take it as a compliment.
You're a bright young man.
This monkey business isin your blood, under your skin.You're not getting out, you're just getting in. I've every faith in you. One day, it will be you sitting here......telling some Young Turk the facts of life.

And they are, Mr. Temple?

You're born, you take Sh*t. Get out in the world,you take more Sh*t. Climb a little higher, you take less Sh*t. Until one day, you're up in the rarefied atmosphere......and you've forgotten what Sh*t even looks like.
Welcome to the layer cake, son.
This thing ends here, tonight. You understand?

Drug money's easy money, not grief.
The odds, as you can see,are against you.
Good night.

 

[DanPickUp]

Yes Mr.G, From the same club!

If you are from the same club, then I hope that you will behave in an other way as Mr. G did in the past. Otherwise you will face problems here. As you also not really trade with real good money, also watch how you react to the people here the way you make any answer. Hope you clearly understand that.