Page 8 - Trading #101 Course – PART II TWO: SUCCESSFUL TRADING PIE – www.traderscoach.com

TRADING #101 COURSE – PART II TWO: SUCCESSFUL TRADING PIE – WWW.TRADERSCOACH.COM

The deeper psychological and emotional aspects of trading your hard-earned money
can be worked on later after you have developed your trading skills. It is first better to
have your approach developed through paper trading and then work on developing a
deeper trading psychology over time.

Paper Trading 10-Step Plan

Don’t be impatient with your paper trading. Allow yourself time to develop your trading
skills and approach. This is time very well spent, so there are no short-cuts. Here are
ten 10 steps for completing a thorough paper-trading test of your trading rules. Check
off each one as you complete it.

1.) Design your trading rules and your money management rules. After you
have designed both your trading rules (technical, fundamental, or a combination
of the two), then write them down on paper in a checklist format. Cover every
aspect of your entries, exits, and overall methodology. In addition, get your
money management rules written down in the same way.

2.) Start to paper trade. Once you are clear on your rules, start paper trading on
the same time frame, in the same financial market, and with the account size you
plan to work with when you use real money. If you have the time to day trade, it
is best for you to paper trade your favorite market. Day trading will shorten your
learning curve because you will trade more often and gain more experience for a
given period. See whether trend trading”, scalping”, scaling in, or scaling out suits
you best. Through trial and error in a safe paper-trading environment, you will be
able to determine if you need to adapt your rules.

3.) Evaluate your performance. Keep track of your paper-trading results and
approach this as if you were trading with real money. Use the PDF printable
Trader’s Assistant Record Keeping Forms that you got with this course to keep
complete records of every trade and its profitability. You may also find my book A
Trader’s Money Management System, released by John Wiley & Sons in 2008
helpful with this.

4.) Group in lots of 25 trades. Group your paper trades in lots of “25 trades” each,
and calculate your profit/loss, average win/loss, largest win/loss, number of
winning trades, number of losing trades, number of consecutive winning trades,
and number of consecutive losing trades. A group of 25 consecutive trades that
has a profitable outcome is a profitable lot.

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