Author: Chris Hood
Be sure to check out new episodes of my video podcast each week, where my ace pupil Brian Jones and I talk the ins and outs of options trading- and give you insights and strategy that you can immediately put to work for you in the markets.
I always insist that every new client paper trade for at least 30 days before risking real money.
I don’t care whether they’ve never traded options or have experience. It is always the first step of learning my system.
Unfortunately, many feel it’s a waste of time.
The new clients will champ at the bit to get started “earning big money” while the response from experienced traders is usually:
“You want me to STOP trading for real and just use a SIMULATION?”
Needless to say, I can’t force clients into paper trading, and the majority skip this step in their education.
So why do I put so much emphasis on it?
Paper trading allows us both to see your ‘trading personality.’
Though lacking the emotional charge of using actual capital, paper accounts serve two crucial functions.
First, they let me know if you’re making any egregious errors in order entry, timing, exits, or set-ups.
All of these problems can be easily fixed – IF we can identify them.
Your paper trading account is a risk-free way to collect data on win rates, profit loss ratios, and proper position sizing. In addition, it gives us a baseline to help develop your plan.
If you can’t turn a simulated profit, why would you risk actual cash?
It just doesn’t make any sense.
The second and most vital reason for paper trading is as a personality test. I want to know your level of discipline.
Those who don’t paper trade have already shown me that they’re unable to follow a plan.
You had your first assignment, and you failed.
If you dive straight into real-money trading or cannot step back from actual trading for just a single month, we have a lot of psychological work to do.
From my years of coaching experience, I know that about 99% of people who don’t paper trade will blow up their accounts or wash out within two years.
Don’t be one of those people.
Of all the traits necessary to become a successful trader, the DISCIPLINE to follow the rules is the most important.
If you worked as an institutional trader, lack of discipline would get you fired immediately.
Banks and hedge funds build rule sets for their trading, and they’re serious about them. Those rules let you know which stocks or options to buy or sell under which conditions.
You’d be given a list of rules on which stocks you could trade, when to get in, how to size positions, when to cut losses, and at what level to take profits.
Deviate from the plan, and they’ll show you the door.
If these institutions making seven-figure trades use structured rule sets, why don’t you?
So model yourself after the smart money.
Creating a trading plan isn’t difficult, but executing it without emotion is. Failure to be consistently profitable is always the fault of the trader, not the plan.
So promise me this.
If you aren’t currently meeting your financial goals consistently, you’ll step back from live trading and go back to paper.
Figure out what your issues are before you get wiped out.
I want you to be successful, not crash and burn like so many would-be traders. As a coach, nothing fills me with more joy than your success.
Now get to work!
Long time financial advisor scores 899% gain in 22 days with a basic stock trade.
No options, nothing fancy – just a single “tell-all” pattern that he’s diligently studied for the past 6 months… delivering the most impressive wins of his career.