I’ve been paper trading recently.
Yes, me. After over 20 years in the market. After $7.9 million in verified profits. After teaching thousands of students…
I’m still paper trading.
Why? Because I’m still not the best trader.
I have no problem admitting that.
Even after two decades, I’m just like you.
I’m still learning.
The market evolves. Patterns shift. New catalysts emerge.
And if I don’t adapt, I’ll pay the price.
The last few weeks have brought some seriously choppy conditions to the stock market.
Major volatility. Frustrating price action. Setups that would’ve worked a month ago are falling apart in real-time…
When the market gets choppy like this, I don’t force it.
I don’t try to throw darts into the void and “hope” it works out.
I go back to basics.
I let the setups prove themselves BEFORE I risk my hard-earned money.
I paper trade.
Champions Practice. Losers Wing It.
Think about the greatest sports teams in history.
The Patriots. The Warriors. The Yankees.
They didn’t win championships by skipping practice and showing up on game day “hoping” for the best.
They drilled. They ran plays. They scrimmaged against each other until the execution was flawless.
Paper trading is your scrimmage.
If you miss practice, you’re probably not gonna win the big game.
If you skip the reps, you’ll get crushed when real money is on the line.
Professional traders understand this. Amateurs think they’re above it.
Guess which group blows up their accounts?
How To Paper Trade The Right Way
Paper trading allows you to test setups and patterns with simulated dollars. No risk. No stress. Just reps.
But here’s where most people screw it up:
They set up a paper trading account with a million-dollar balance.
Don’t do this.
Simulating millions of dollars skews your early views of the relationship between risk and reward. It makes you deal in large numbers that you don’t need to worry about yet.
You start thinking in terms of $50,000 positions. $100,000 gains. Numbers that have nothing to do with your reality.
When you then switch to real money with a $5,000 account, everything feels wrong. The psychology is completely different.
Instead, simulate a dollar amount that’s closer to what you’ll actually be trading.
If you’re starting with $3,000, paper trade with $3,000.
If you have $10,000 to work with, paper trade with $10,000.
Make it real. Make it relevant.
Looking for some inspiration to start your paper trading journey?
Trade Your Strategy, Not Your Fantasy
Once your paper account is set up with a realistic balance, start trading simulated dollars exactly as you plan to within your strategy.
If your plan is to risk 2% per trade, risk 2% in your paper account.
If your strategy is to cut losses at -7%, cut your paper trades at -7%.
If you’re targeting 10% gains, take profits at 10% in simulation.
Don’t cheat. Don’t take shortcuts. Don’t hold paper trades longer than you would real ones just because “it’s not real money.”
The whole point is to build the habits that will save you when risking real money.
If you make solid returns during this testing phase, you might be on to something.
Your strategy has potential. Your pattern recognition is developing. You’re ready to scale up with small real money.
But if you blow up your paper trading account, you’ll know your strategy isn’t ready for primetime yet.
And that’s priceless (literally).
Much better to learn that lesson with fake money than real dollars…
Paper Trading Saves Accounts
Too many traders think paper trading is beneath them.
Then they lose. And lose. And lose some more.
Their account shrinks. Their confidence evaporates. They start revenge trading to make it back. And before they know it, they’re done.
Paper trading isn’t just for complete newbies…
It’s for anyone who wants to win in this market.
It’s how you test new strategies without risking capital…
It’s how you build pattern recognition when the market shifts…
It’s how you stay sharp during choppy, frustrating conditions when forcing real trades would be a mistake…
Even after 20 years, I’m still using it. Because I’m still learning. I’m still adapting. I’m still trying to get better.
And if you’re not doing the same, you’re already behind.
If you have any questions, email me at SykesDaily@BanyanHill.com.
Cheers,
Tim Sykes
Editor, Tim Sykes Daily
