Paper Trading For Beginners.
What is paper trading and benefits of paper trading.
Paper trading is nothing but trading with pen and paper without actually entering into any monetary transaction. In paper trading you test your knowledge, understanding accuracy and performance of you trading strategy . Instead of actually buying and selling currency you decided to trade, you actually mark the entry price in your notebook, as the market touches the entry price and mark the termination of the trade, either profit booked or stop loss hit on the same paper. This trading record will tell you how your trading strategies working and how effective are you in initiating trade using your currency pair selection methods.
you can at least spend a few weeks paper trading before you go live with real money and time to familiarize yourself with your currency pairs selection methods. After learning this technique you should open a trading account in demo,
then watch the real time price action of your selected currency pairs to spot buy signals as per your technique. If the price action gives buy signal you should initiate a Trade on paper by writing down the exact entry price, exit price and stop loss price and open the same trade in demo account, After finishing the trade you should also write down whether you have made profit or loss on that trade. For every trade, you should also write down your comments on the trade regarding how you have identified buy signal, How you have classified that buy signal, (as strong signal or medium), if it ended in profit, what you have learned from that trade and if it ended in loss what you have learned from that trade.
In paper trading, the impact of fear and other emotions will be very minimal since there is no money involved. Naturally you will be very confident while paper trading when compared to real trading. This results in high success ratio. So, even if you have come out with high success ratio in paper trading, you then invest decent capital in real trading account during first few weeks and after earning profits you can invest large capital to earn more profits.