Welcome to the real world of trading

“Seeing is believing, but feeling is the truth.”
Thomas Fuller
The above is a hypothetical yet common example of how traders who have made money on
paper suddenly crumble under the strain of real trading. Many people deride paper trading
and say it is of little use. However, providing you know the pitfalls in advance, it is a great
way to mentally prepare yourself for the day you have to trade real money.
“The mainstay of training is confidence. That’s why we show them how to let a tank run over
them - it gets their confidence up.”
Officer in Charge
US Special Operations Command
Of course nothing will take the place of the real trading arena; however, practicing the basics
on paper is a very useful exercise. To ridicule paper trading is similar to saying soldiers
should not go on manoeuvres because the bullets are not for real! In conclusion, paper trading
is useful if we adopt the right attitude to it, (i.e. we make it as realistic as possible and we
don’t cheat).
Going back to our hypothetical example, it is clear that the trader was making investment
decisions based upon his emotions rather than logic. No matter how good the trading system was that he used, he would still fail due to his lack of discipline and self-control. This is not
to imply that you can trade any system with discipline and be successful; however, a
disciplined trader with a mediocre trading system has the edge on the best trading system in
the world if its operator lacks discipline.
To develop discipline you need to acquire total confidence in your abilities, i.e. acquire selfcontrol.
You can do this by acquiring knowledge, practicing on paper and real time trading
experience. Nothing replaces real time trading, but preparation in terms of understanding the
markets and how you should relate to them will give you a distinct edge in the quest for the
big profits.