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Trading Tips

Trade real money, not paper money

In the last chapter of The Essentials of Trading I wrote something that many people would consider flying in the face of most commonly held trading views. I said, in no uncertain terms, that you should start trading with real money as quickly as possible. The point I was making then, and continue to make when I talk to developing traders, is that you will never get a proper understanding of what trading really means until you have money at risk.

Now of course I’m not suggesting in any way that someone new to the markets dumps their life savings in to a trading account and starts buying in selling. That would be the height of folly. Risk management must always be the first consideration.

What do I mean, though, is that you can quite easily these days take a little bit of money and do some trading. I know there is at least one forex broker who will allow you to open a trading account with no minimum initial deposit and no minimum trade size. That means you can get in to real world trading without putting a large amount of capital at risk.

Why do I think this is so important?

Quite simply, paper trading is never going to give you the proper feel for what you will go through when your money is actually on the line. It doesn’t even really have to be a large amount at risk to make a meaningful change in your view of the markets. Trading with real money impacts your psychology. It’s important that you understand exactly what that impact will be as quickly as possible. That knowledge can really help you develop as a trader.

Psychology aside, getting as much trading experience as possible is something all traders should be doing. As a recent Kirk Report posts says “books, websites, seminars, etc. on trading will never replace battle-hardened experience”. Throw paper trading in to that mix. Just as in any other area of life, the more you do something, the better you will get at it.

So put a little bit of money in a real account and get trading!

By John

Author of The Essentials of Trading

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