Saturday, 18 February 2012

Paper Trading The Sharemarket Can Be More Riskier Than You Think

If you think there is no risk in paper trading, do not be fooled. The greatest risk about paper trading the stock market is that you may never actually get to trade.
A number of years ago, I read about a certain psychologist who wrote a book about gambling. This guy actually bets on racehorses. He claims he is in front by miles. The reason why he is in front is he has never actually placed any money on the horses he backs. You see, he paper trades; that is, records what he would have done, if he had of had a wager, on paper. The irony is he claims that anybody who takes a professional attitude to investing on racehorses will win because he is also winning on paper.
This is the problem with paper trading when it comes to the share market. It is good for those who want a pastime where there is no actual money to be made or lost. If you want to be a paper trader and play a form of the board game monopoly, then that is fine. The only cost will be your time and the material you use to record your trades.
What happens when people paper trade is they never start to experience the other aspects of being invested in the sharemarket that need to be taken into account. You know, the mind games and emotional highs and lows that have to be mastered in order to be a truly successful trader or investor.
The market is so unpredictable that anything can happen at any time that is enough to give you a heart attack. Like the time I bought 200 thousand shares in a stock at $2.00 and patted myself on the back when I saw they had gone up to $2.10. My target was $4.00 before I intended to sell.
I went for a thirty minute run and when I checked the market after I had got back, the share price had fallen to $1.50. Evidently, a very large investor sold out his holding. What do you do in a situation like that. Bail out and cop the loss, or do you wait and hope that the market goes back up? One thing is for sure, as a paper trader, you will not have to face such a decision.
A paper trader never gets the same thrills; nor spills anything when he sees the market go down. When you trade the indices and see how far some markets will move up and down during the day, if you are not conditioned to withstand the emotional rollercoaster, you will end up a nervous wreck. Because of this, paper-trading is more riskier than people realize. You see, on paper you might be making a fortune so I you tip in all your savings so you don't miss out. The trouble is you have missed out on the psychological conditioning required to be a successful trader.
If you are going to be a serious trader, instead of paper trading, take the risk out by putting aside some money to play with. This is real money that you will be able to lose, but will not give you angina if you do happen to lose it all. Trade with the smallest amount of money possible and become disciplined. This way you take all the risk out of the equation and you will succeed in the long run.
Happy Riches knows how to show you how. Happy Riches also runs an educational membership club which has a focus on people becoming healthy, wealthy and wise, of which the internet version is currently being offered free of charge. Happy Riches can be found at

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