Setting Up a Paper Trading Account
Question:
I cannot trade with "real money" as yet; yet, how do I set about setting up a paper trade account?
ONLINE MONEY TRANSFER APP
Answer:
You can paper trade various ways and it really does not require that you have anything more specialized than a notebook to track your trades and access to charts.
Begin by funding your paper trading account with the sum you think you will really begin with, whether it is $2000 or $20,000. I would suggest that you begin with no to a little degree $5000 and $10,000 is even better.
Next you need to decide on which markets you are going to trade. The more money you have in your account, the more markets will be available to you. If you are trading with a $5000 account there is no point in becoming familiar a market like Crude Oil that has a margin of $3000 per contract!
Assuming that you are a small monger, you will be most interested in the lower margin markets like the grains, some of the meats, maybe a metal and a currency or two. I would suggest you limit your scope to about 6 - 8 markets, as these will be enough to track on a daily basis.
Even real money mongers rarely follow more than 8 markets...it just becomes too cumbersome, as I'm sure you will find when you've got more than one paper trade going at a time.
If you don't know which markets to choose from, maybe I could make few suggestions:
* Corn, or wheat - these are good markets for mongers of all levels, but especially the beginner. The margin is not too high and the markets commonly act predictably and trend well. Corn and wheat have a tendency to move together (but not always), so observation both can be redundant.
* Cocoa - a good market to make money in as a small move can add up to good profits. Also can be a good market to lose money certain the same reason. I don't mind cocoa, although I know people who have sworn it off. This is the time to find out if it is for you...when it doesn't cost you real money.
* Sugar - accustomed be a good market because it is easy to get in with stripped-down risk; yet the abundance of support and resistance can make it confvictimisation to new mongers. Lately the market has lacked direction which only adds to the confusion. Still it is low margin and comparatively low risk market to trade.
* Live Cattle - a decent meat market. Some new mongers avoid the meats entirely because of their power to make huge ranges. Cattle is the "safest" of the meat markets.
* Cotton - can be a good market, but is capable of making large ranges. I accustomed avoid cotton like the plague, but have become fonder of it in recent years.
* Soybeans - the Pork Bellies of the Grain complex. If soybeans are too volatile for you consider trading one of the bean cousins, like soybean oil, or soybean meal. They tend to mirror soybeans, but are generally less margin and less volatile.
* Silver - I like the metals; yet gold can be a little rich for the small monger. Silver mirrors gold - the poor man's gold. Some people like copper, but I consider it too thin and margins too high for small mongers.
* Canadian Dollar/Australian Dollar - two of the more reasonable currency markets. The margins are lower, but there is superior money making potential. Other markets like Swiss Franc, British Pound, and Japanese Yen are good markets too but require much more margin and risk. All the currencies have a tendency to get in the same direction anyway (opposite the US Dollar) so it doesn't really matter.
But don't stop here, this is the time to practice and refine your skills so admit any other markets you are interested in, but avoid the exotics like lumber, rice, oats, palladium, etc. They are just too thin and too volatile for the small monger to be involved in.
Now that you have a paper account and a mix of markets to trade you need to search the markets to find trades to make. Once you have found a trade you like, write down your entry, your exit and your profit target - exactly.
If you are dealing with a broker, you can call and ask them if your paper order had been filled on a particular day. Alternatively you can just look at the charts and figure it out for yourself.
Sometimes you will need to see an intraday chart to know exactly when you got your fill. Barcharts.com offer free intraday charts. Just follow the good chart link then click custom charts to alter the time frame displayed to a 5 or 10 minute interval.
Track your trades daily keeping a journal of your profits and losings. A simple way to "journal" your trades is to put them on 3x5 index card game - one card per trade. Write down you reasons for taking the trade too as exact entry and exits. Make sure to note what you did right and what you would do otherwise the next time. Allow an extra two ticks on your fills and exits as this will simulate slippage. Brokerage fees are commonly $40 round turn per contract.
See how well you can do but be honest. Cheating here will not help you in the future. I'm sure you've detected it before, but nothing changes when you trade with real money. If you can't hump on paper, you won't make it for real. Trust me. I've been there.
If you don't already have it, you power want to consider victimisation Gecko's Track 'n Trade Pro. As the name suggests the software package program not only provides charts but also "tracks your trades". You fund a fictional account, place your orders and the software package program will automatically update your position daily.
It really is phenomenal software package program and if you are halfway serious about trading you should check it out. It is a legitimate tax write-off too. ;-) You can get a free 30 day trial by following this link: [http://www.trackntrade.com/demo/?abbr=SENFT]
There is also paper trading software package program out there and on the net which is supposed to simulate trading; yet in my opinion it is not realistic for most small mongers.
Some of the simulators only allow you to trade the e-mini and others start you out with a $50,000 account. This is great if you want to trade the e-mini, or if you are trading with a $50,000 account, but this is not the case for most mongers.
Anyway, that's paper trading in a nutshell. I hope it helps a little. Please do not hesitate to write back if you have more questions, of if you need me to elaborate on something.
Best of luck,
- Erich
erich@supportandresistance.com
PS. Don't skip this part of your education. Most mongers hurry through paper trading only to get killed in the markets. Don't make this mistake.
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to reach profits or losings similar to those discussed on this web site. The past performance of any trading system or method analysis is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
0 Comments