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Stan Katz wrote:
> My objection to paper trading is that there is a large psychological
> component in trading decision-making. There is more to learn about
> eliminating that component than there is in finding the "right system" for
> successful trading.
I totally agree. However, the first step is to come up with a reasonably
sound plan *before* you start putting money on the line. It would be
extremely foolish to just jump in and make things up as you go along; and
besides, lessons learned in actual trading are only useful for fine-tuning
strategies, not constructing them. Backtest your ideas first, then paper
trade them in real time for awhile to get the feel for acting on your
signals. If you can do this with a simulated account, all the better. Then,
when you start getting comfortable, only then should you consider doing the
real McCoy. Even then, be prepared for a bumpy road, as you make the
necessary further refinements to your method and become more and more
acclimated to the stresses of this business.
> Concentrating on controlling losses is the first step
> to being able to stay in the game.
This is the absolute key to surviving. The importance of this cannot possibly
be overstated. You will screw up again and again, no matter how talented you
may be. This isn't just important in starting out, it is the cornerstone of
sound trading.
> Having observed trading results by
> amateurs and fund managers over the years (30 of them), I have yet to see
> consistent very large returns.
Don't let this discourage you. It's virtually impossible to get any kind of
decent return with the kind of capital that funds manage. As far as amateurs
go, I don't see any reason why one could not be successful doing this as a
sideline, although there is no substitute for devoting your full-time efforts
to trading.
> Developing the psyche to limit losses is, in my mind, the
> first area for concentration.
Just one of the thing one must develop the psyche to do. Being able to pull
the trigger at the appropriate entry and exit points, learning to trust
yourself, learning to focus on method and not results, and so on are equally
important.
Regards and Good Luck,
A.J.
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