| With nothing at stake, you can show that you are | | | | trend of the market along with the trend of the |
| able to succeed in paper trading because the | | | | stock being traded. He has a general notion that |
| psychological element is largely held in check. | | | | the company behind the stock is on solid ground |
| Whatever trend following method and technical | | | | with good fundamentals. He does short-term |
| analysis indicators you are using, you are able to | | | | trading. When he sees his position in the red, he |
| apply that without emotion. To the best of your | | | | sells immediately. When it isn't that case, he is |
| preparation, you make a decision to enter a | | | | making money on his positions which he sells out |
| position. When you see your position is at a loss | | | | quickly to take the gain. |
| and is on the wrong side of the trend, you close | | | | Not meaning to stifle his enthusiasm with his great |
| the position. There is none of the psychological | | | | findings and conclusions, I pointed out that the |
| game that people use in trading with real money | | | | psychological factor is what ultimately hinders |
| where they justify that it is just a "paper loss". | | | | trading with real money. When I told him that |
| And if indeed you are on the wrong side of the | | | | people end up in paper loss scenarios, he merely |
| trend, that paper loss becomes an even bigger | | | | retorts in typical youthful fervor that it is just a |
| paper loss and your next psychological play tells | | | | cover-up for a situation that should not be. He |
| you to hold on to that paper loss until it recovers. | | | | logically states "just close the position and take |
| Now you are losing to time and have become a | | | | the loss". He is of course right. |
| longer-term trader than you first started as. | | | | When I made the point that emotions will get in |
| So, you have graduated from paper trading | | | | the way when it comes to real money, and that |
| school. Your credentials are excellent. Your track | | | | it tends to be very hard to overcome ones own |
| record is very good. You have confidence that | | | | emotions, the next logical answer he gave me |
| your methods and systems work. You have | | | | was "I can see myself going to the casino and |
| proven that you can exercise discipline. But will | | | | winning at Blackjack and I would do that before |
| you be able to exercise the same level of | | | | stock trading with real money". His point being |
| performance in real trading? Will you be able to | | | | that Blackjack is more calculated and deterministic. |
| suppress your emotions when dealing with real | | | | I am not conjuring up the notion of stock trading |
| money? | | | | as being equivalent to casino gambling (although |
| While talking to my son who is doing simulated | | | | others may have done so). |
| stock trading in an accounting class, I learned that | | | | Furthermore, I did not get into the discussion of |
| he was the leader in gains for the second-time | | | | the equal need to suppress emotions in casino |
| running. In his short time with paper trading, he | | | | Blackjack. But suffice to say, the psychological |
| has very quickly learned the same things that | | | | factor with real money must be kept in mind |
| took me longer to learn in trading with real | | | | when transitioning from paper trading to trading |
| money. I asked him how he made his entry point | | | | with real money. |
| decisions and he said he looks at the general | | | | |