Here’s a paraphrase of a comment that I got, that spurred today’s article:

It is easy to make money on the free trading platforms, but much harder when you playing for real money.

Papertrading IS different from trading your own money… there’s no doubt about that…

What’s the major difference?

Emotions.

When papertrading often times you will be able to see situations clearer, act more decisively and cut your losses much quicker because you don’t associate the gains and losses you’re making with your hard earned money.

The challenge for most people making the transition is that after papertrading and racking up huge gains, they jump into real trading expecting the same results.

This would be true if you could act with the same clarity as you do when ‘fake’ money is on the line…. unfortunately few people have the ability to do this.

So how can you make the jump?

One way is to gradually ramp up your trading size.

What do I mean?

Ok, first off, get strated with papertrading. I know I said that it isn’t like real trading BUT it does give you the opportunity to get your feet wet without risking your trading capital right off the bat.

After you’ve spent some time refining your papertrading AND have strung together some gains AND have been following you plan AND feel ready to move the next stage, start trading real money, but only a mini contract or 100 shares to ease your way into the market.

Why would you do this?

Trading a mini contract or 100 shares allows you to remain emotionally detached.

Gaining or losing a few bucks here and there will allow you to act just as you did when you were papertrading… that’s the point!

As you are able to trade this small amount and generate a string of gains then increase it… for example double it.

Rinse and repeat.

At each stage trade those funds until you feel that it’s almost too easy AND you are able to generate gains.

The key lesson to remember at this point is:

You’re not trading for money, you’re trading for skill.

What you’re doing is developing the emotional comfort that comes with trading amounts that don’t scare you. And this is where most people go wrong… most often people overtrade by risking amounts that constantly put their entire trading accounts into jeopardy… as a result they are fearful and can’t think straight. They start hoping and praying instead of analyzing and trading. If you ever find yourself in that position, realize that the cure is to scale back your position, or close it completely.

As you follow this gradual scaling process you’ll notice that you’ll be able to focus more on trading and less on the money… and that’s what it’s all about.

Stop increasing your trading size when you are trading the position sizes that are inline with your account size and risk tolerance. (I cover this in detail in Market-Millions.)

Continued Success!

Ray

Categories: Trading

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