You had a successful year of paper trading! What’s next? How do you transition from paper trading to live trading while maintaining a strong trading psychology?
Transitioning from paper trading to live trading is a crucial step that requires careful planning and psychological preparation. Here are some key points to consider:
1) Start Small: Begin with smaller positions in live trading. This helps you manage risk and gradually adapt to the emotional pressures of real money at stake.
2) Stick to Your Plan: Rely on the strategies that brought you success in paper trading. Trust your analysis, set clear stop-losses and targets, and avoid deviating from your plan due to emotions.
3) Mindset Shift: Understand that live trading is different from paper trading primarily because of the emotional component. Be aware of how fear and greed might affect your decisions, and use techniques like mindfulness or journaling to keep these emotions in check.
4) Continuous Learning: Reflect on each live trade just as you did during paper trading. Analyze what went well and what didn’t, focusing on whether your emotions influenced your decisions.
5) Manage Expectations: Accept that not every trade will be a winner. The goal is to follow your plan consistently. Over time, this will lead to long-term success, even if some trades result in losses.
6) Build Confidence Gradually: As you gain more experience and confidence in live trading, you can gradually increase your position sizes. The key is to maintain the disciplined approach that led to success in paper trading.
By following these recommendations, you can make a smoother transition to live trading while keeping your emotions in check and staying on track with your trading goals.
For Those who are already into Live Trading but experiencing Losses as compared to Paper Trading... Read below :
You likely already know while you were paper trading it was kind of emotionless. When paper trading, we only cut our losses when the stop-loss (SL) we’ve set is actually hit, and we wait for our targets to be reached without cutting early. However, in real trades, emotions often take control. We tend to exit early without the planned SL being hit, leading to multiple entries and added losses. Sometimes, our emotions stop us from exiting even when the original SL is hit, causing more losses and unnecessary averaging.
There’s a Japanese proverb that says, "If you get on the wrong train, get off at the next station, the more you delay more it will cost you to return to right direction" In trading, this means you should not hold onto losing trades, hoping they’ll turn in your favor—90% of the time, they won’t. Cut your losses as soon as your planned SL is hit.
When it comes to targets, fear of losing takes over. We worry or anticipate about the trade reversing, so we exit early, fearing we’ll lose the profit we’ve gained. This mindset affects our psychology and can lead to unprofitable trading.
Important is :
1) Stick to your planned stop-loss. Don’t let emotions keep you in a losing trade.
2) Don’t exit early out of fear when your target hasn’t been reached.
So here are the two simple recommendations from us.
1. Be Disciplined and keep calm- your trading style may vary but being disciplined is most import part of getting in trading business. Suggestion from our side are listed below.
a) Plan your stops before placing your trades
b) Enter with 40% of your planned position ( this is because we may not be always 100% correct with our entry point)
c) You may draw Fibonacci from your SL(Stop Loss) point to entry point.. (0.5 zone to 0.22 is zone where you can average your trades if you get the opportunity ) If you do not get opportunity to average you are big lucky that your trade is directly going to towards target zones.
d) If in case position is averaged , suggest to apply 60 -40 rule. i.e exit 60% of your quantity at original entry price by doing this you are making your trade overall kind of risk free or with small sl. For Rest 40% of your quantities you may wait for your decided targets. Usually this would be 1:1 for 20% and last 20% to ride the trend.
e) Even if at worst say that all your quantities SL hit by doing this you still save some of your account money by not putting all your quantities at original entry price.
Take a look at attached image.
f) Other way is hedging which we will learn in some other post.
2. Never Forget Rule no 1 !!
Keep Learning !!
