Real Trading and Emotions

...I received an e-mail from an aspiring investor in the market and was very pleased to see the progress of this young student. He stated several experiences he has had with the market but then went on to tell me that they were all through a virtual account. While his experiences are great, I had to stop him short when he compared them to my own real life experiences when I lost a great deal of my money during the early stages of the bust in 2000. I know he may have become emotional when the virtual account lost money but this pales in comparison when you or I lose real money in the real market. Below is what I wrote back to this student of the market:

It is great to see you learning how to cope with the market and your emotions but I must let you know that paper trading and real trading are two different universes. Losing on paper is nothing like the real thing and your decisions on paper will never resemble what you actually do in real life with real money. I am not trying to discourage you but it is not the same, no matter what anyone says. Try it and you will know exactly what I mean.

Another comment: I would suggest that you paper trade a realistic amount instead of $100,000 because that doesn’t seem like the amount you would start with in real life. If you are only going to start with $5,000 or $10,000, only paper trade with that amount so you can get a more realistic feel for what you can accomplish. Make your virtual trading as close to the real thing as possible. Buying $50,000 in calls doesn’t seem realistic at all (you would never do that at this point in time in real life, if ever).

One last thing: even if you only have $2,000 or less, trade it for real. Get your feet wet and see what happens. Don’t try to make money, try to develop a real life system. Make mistakes and learn to control emotions because it will only make you stronger later in life when you do trade larger sums of money. I am not sure how old you are but starting with any real amount of money is better than fake money in my opinion. Some will argue that virtual trading is very helpful and I agree on a limited basis but nothing will ever teach you what you need to know except the real thing.

Keep reading and keep learning and good luck.
Piranha