Futures Paper Trading

Written by Jacey Harmon
Bookmark and Share

It has been said that nine out of ten futures traders lose. The futures market, due to high leverage capabilities, is one of the riskiest markets out there. Despite all the risk, people are attracted to the futures market and its potential for strong profit. With futures, one can easily double or even triple an investment in just a few days. Of course, high reward comes with high risk and one can lose everything in a short amount of time as well.

Test Drive Your Trading Strategy

Before you ever risk a single dime in the futures market you should test your strategy. This is called "paper trading" and is used by traders to test trading theories. When you paper trade you simply follow a strategy without putting up any capital. You would simply follow your trades in a spreadsheet or on paper.

Paper trading is a good way to see if your trading strategy has flaws or is profitable. But don't get caught in the trap that paper trading simulates live trading. It is much easier to paper trade than it is to put real money on the table. You can easily pull the trigger when you don't have any real money involved. You may be likely to hesitate when you have several thousand dollars on the line. That hesitation can make the difference between success and failure.

Once your money is involved your emotions will take hold. Greed and fear are every investor's worst enemies. They sit on the sidelines when you paper trade, but once the action goes live they rear their ugly heads. Greed and fear causes you to hold on for larger gains or lets small losses spiral into large losses. Paper trading is a good way to see if your trading strategy has any fundamental flaws. It is not a good way to see if you can emotionally handle the pressures of trading.


Bookmark and Share