Avoid The Paper Cuts

Now most new investors are very eager to start putting their money to work in the market. However the stock market will be here tomorrow and the next day and the following. It's still time to teach you how to avoid losses (Warren Buffett’s #1 Rule). How do we do that? You might be asking.

By paper trading for just a little bit, for most traders this topic tends to fall on opposite sides of the spectrum, either don't do it, or have done it for years. We are on the little bit side, after you can formulate a proper game plan and can read a chart, you’re better off getting some skin in the game and put the video game down. 

However, let's play the video game for a game or two. By paper trading you are using simulated trading to practice buying and selling stocks without actual money being involved. Paper trading can be done by simply keeping track of hypothetical trading positions.

Some benefits of paper trading: 

  1. You can trade as many names as you want for free.
  2. You can find out your success ratio (number of winning to losing trades).
  3. You can find out how good/bad your entry, stop and targets are.

Some pitfalls of paper trading:

  1. The psychological aspect is removed since there is no real risk involved.
  2. You will be a paper trading legend as a result of the no real risk. 
  3. Take note that paper trading is child's play, and those easier winners tend to be much harder when you turn the jets on (real money).

Now if you have an Iphone go download Stock Wars, it's free and we have no affiliation with the app. If you’re old school, grab a pen and paper and write down your stocks, your entries, your stops, your targets, your risk. 

I would recommend being as realistic as possible. If you have $1,000 to invest, only paper trade on the app with a $1,000 position, or if the number is $5,000 or $100k then use those figures on the app instead. The more realistic the more it will help you. Select at least 5 companies and list your entry, stop, target in the Game Planning Chat.


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