You Should be Papertrading

This post about about a mistake I made early on so that hopefully other new traders can get more data early like I wish I did.

Like most of us, I didn’t want to “waste” my time on papertrading because it can never fully simulate real trading. However, an interesting thing happened over a decade ago, when I started papertrading more, my real portfolio returns actually improved.

Why?

1. I decided to take papertrading more seriously and essentially treated it as a second margin account. I was using “papertrading” as an excuse to be lazy and undisciplined. If I wasn’t able to take a papertrading account seriously and perform well, why would I magically get better with a real account? Like we say in the military, sweat more in training, bleed less in combat.

2. I started trading TONS of variations of existing strategies and created comprehensive data sets based on real information that I was able to optimize off of. When did my 4 DTE SPX Straddle work best? What delta did I want to select for the long leg of my LEAPS Ratio diagonal? I started with assumptions then optimized off the data set I was building.

3. I test (present tense because I still do it) literally hundreds of strategies. I find what works best for a wide range of market environments so I can take better advantage. I see a cool strategy on here, sick, papertrade it and see how it performs since I don’t trust 99% of what I see here. Have a hunch on how to trade election years? Cool, test what strategies and what configurations work best.

Papertrading will never be a direct replacement for real trading. That in no way means it should be cast aside as useless and it’s a mistake I made early on. I missed over 4 years of some of the best possible data I could’ve gotten early on with this faulty mindset.

The key is to have robust tracking protocols, I use excel and python, to make good use of the data.