I get this question a lot...
New traders asking me if they should paper trade before risking real money.
Well it may surprise you...
But my answer is an emphatic NO!
Because paper trading teaches you all the wrong lessons.
When you paper trade... you’re actually optimizing for the wrong thing... because you’re trying to feel certain before you commit money.
But in trading, if you're good... you will never feel certain about any particular trade.
In fact the only trades you do feel certain about… are the ones you’ll probably lose.
It's like learning to swim by watching people splash about in a pool...
Because while they might look good, and you might be able to replicate whatever they're doing... as soon as you jump into the water, any semblance of technique you thought you might have is gone… and you're just waving your arms trying not to drown.
Paper trading teaches you to cherry-pick... wait for “perfect” setups... and override any system or strategy when your gut says so.
(that's ignoring all the other nuances like perfect order fulfilment, lack of emotional hangover from a string of losses, and 500 other things I don't have time to write about today)
That’s why systematic trading works... because you have an understanding that even though you have an edge... you are still going to lose X% of the time.
You just need a way to limit those losses so your wins add up more over time.
So what should you do instead?
Start trading with real money, but keep the stakes tiny.
Use $100. Maybe $50 if you’re really nervous.
Execute the trade... and really feel what it’s like to have real money on the line.
Worst case, you mess it up completely and lose a few dollars.
You'll get a far better education than paper trading for months and learning all the wrong lessons.
This is exactly how I started, my first credit spreads had $100 on the line.
And the first time I did the Wheel was on an $8 stock.
Risking amounts that made any losses real... but without being devastating if I was wrong.
That small amount of real money taught me more in one week than six months of paper trading ever could have.
Because when real money is on the line, even $50, your brain engages differently.
You pay attention to details you’d ignore in paper trading... and you feel the emotional component of trading, which is 80% of the battle.
Most important of all, you learn to follow your system instead of your gut.
Paper trading lets you lie to yourself while real money (even small amounts) forces you to be honest.
So if you’re just starting out and want to know which strategies I’d focus on if I were in your shoes…
Oliver