Why "Paper Trading" Is Worthless

Why "Paper Trading" Is Worthless

What’s the best way to get your feet wet trading/investing?

Many folks will tell you that trading on paper is the best way to get started. Our buddy Brian Hunt writes today that this advice is crap!

Becoming a good trader isn’t just about learning about charts or buying cheap assets. It’s about suppressing the desire to “make it all” on one big trade… learning how to take small losses… and learning when it’s time to simply sit out the game for a while.

Paper trading doesn’t get you any “live fire” training on overcoming your emotions. It’s like trying to learn how to hit a baseball by swinging an imaginary bat. So what’s the new trader to do?

I agree wholeheartedly with Brian. When I was a senior in college, my good friend Joe and I each opened up a Scottrade account with $500, the minimum amount allowed.
We loaded all of our eggs in one basket – he bought Bally’s Total Fitness, and I was fortunate enough to buy Dick’s Sporting Goods.
Every day, every hour, we’d watch the tickers on our respective stocks. If DKS ended Friday on a positive note, I’d be on a high through the weekend. When Bally’s tumbled, I was razzing him on his lack of investment prowess.
It was great fun, and addicting, and most important of all, educational. My stomach would churn if DKS slumped a few bucks – at one point my paper losses almost totalled $80! Fortunately for me, DKS rallied and by the time graduation had come around, I had nearly doubled my initial stake.
So if you find yourself watching a market from the sidelines, please realize that the best way to learn it inside and out is to actually get in the game! You don’t have to put a ton of capital on the line – just start with a small stake, and see what you can make out of it!