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appC JWBK182-McDowell April 25, 2008 16:30 Printer: Yet to come

APPENDIX C

The Art of

Paper Trading

I

t’s beneficial to be profitable first bypaper tradingbefore trading with

real money. Although paper trading will not have exactly the same psy-

chological feel as trading with real money, it is a useful way to practice

your trading skills in a stress-free environment so that you can focus on

your financial approach and trading rules. Paper trading gives you time to

hone your trading skills without losing money.

Those of you who are my students or have read my book,The ART©R

of Trading,already know my position in favor of paper trading. Ironically,

this topic is frequently debated, and there are a few traders who have gone

on record as opposing the entire idea of paper trading. We’ll go into the

pros and cons of the subject in the following pages.

EVERY FINANCIAL MARKET IS A

CHAMPIONSHIP ARENA

Trading is a zero-sum game. When you enter any financial market you

will be competing against some very skilled professionals. If you enter

the market as a novice, you will be competing against traders who have

more skill, more experience, and a larger account size. To give yourself

a fighting chance, you need to enter the markets as skilled as a profes-

sional. Anything less will make it impossible to succeed in trading on a

consistent basis.

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