Tuesday, September 20, 2005
Paper Trading: Waste of Time or Valid Learning Method? by Vadym Graifer
One of Ensign's features that first attracted me was its
playback wherein you can replay price-action from any prior day using your own chart settings.
As only one symbol can be played back, if you use TICK or other symbols to make your decisions, you cannot simulate how those symbols would interact. Nevertheless, for "burning in" a partiuclar pattern or setup, I have found playback invaluable. For that purpose, I use the 10x setting as all I am after is teaching myself to recognize something
fast. I don't enter trades for this purpose as it would be nutty, albeit rather fun.
A few things I don't like about playback, however, have to be mentioned.
Sense of reality: I get no, nada, niente, sense of putting my own money on the line. I do not and have not used playback for paper trading. In fact, for me, playback with this idea in mind works against me, giving me a false sense of success. That is me, and perhaps it's because I've traded my own money long enough to know the difference. Having said that, I can appreciate "demo" modes to learn the mechanics of entering trades, such as with the IB/TWS or other front ends.
Memory: I don't like to playback a symbol that I "know", especially if it is recent, as I remember every significant move!! I couldn't recall a specific date's action, but start the playback, if I traded that day, it comes back to me. It's like knowing the answer to a final-- this is not a test of my abilities, it is a cheat! So if you trade the ES, try playback on YM-- overcoming the discomfort of "odd" price is itself a useful lesson, in my opinion, and might force you to look at the action/patterns in a fresh way.
Speed: Well, frankly, I get distracted and bored trying to playback real-time or near real-time. Mind you, that may be reason enough for me to use real-time playback: to sharpen my attention skills, which admittedly lag and expose me to trouble after noon NYC time. However, I don't know that playback would help me here. I've learned to simply not trade, take a break, or take only the very best setups once I've become aware that my focus is scattered.
Anyway, enough of me. I felt it only fair to dribble on about my views before pointing you in the direction of what is a
pretty decent article on paper trading. Trade2win.com may require a (free) membership to access.
From Vadym Graifer's article:
Let’s try and build the rules of paper trading that will allow us to turn it into powerful learning tool. We can identify three cases where paper trading instead of live trading is in order:
1. A beginner getting his feet wet.
2. A trader testing a new trading system.
3. A trader hitting a losing streak. [more]
My short break from trading is almost over-- be back in a couple of days.
Labels: trading-method
