Education, paper trading and live trading with low shares should be used together to acheive success in the stock market.
What is Paper Trading?
- Trading stocks with a fake account or with fake money
- A way to practice before doing live trading
How to Train
- Get as much education as possible
- Begin paper trading
- Do live trading on low shares in order to gain experience (if you have a stock worth $50/share, don't trade more than 5 shares
- Example: as the stock market goes up, add 1 share (this will cost you commissions, but you will gain experience), and continue adding one share at a time as it goes up.
- Commissions can cost from $5-$40 per trade. You will be losing money. This business requires your time and money in order to gain education.
- Put these numbers into an excel spreadsheet and multiply them based on the number of shares you want to trade in the future. See if you're making a healthy profit.
- If you're consistently successful and you're trading properly, then begin live trading with larger shares.
Why Live Trading With Low Shares is Essential
- The problem with paper trading is the trade executions will fill automatically, but they might not in live trading: stocks might be more scarce, trade timing might be off, etc.
- Your mindset is changed in live trading (anxiety, fear, you're using real money, etc)
- Many people are successful with paper trading, but not with live trading initially
- If you go right from paper trading to live trading with larger shares, you're likely to lose a lot of money