lystn

Hey everyone, welcome back. On today’s daily call, I want to encourage you to please stop paper trading unless you’re doing this one thing. This is a podcast for anyone out there who’s started to paper trade or you’re thinking about paper trading which is basically just simulated or fake options trading until you get comfortable with the markets and maybe your broker platform. Paper trading is actually very popular and I don’t obviously suggest that you start with paper trading unless you want to. It’s just a way for you to get more comfortable and familiar with a platform, but it’s not a requirement by any means to paper trade first before you start real money trading. But here’s the problem I see with people when they start paper trading. I like the concept of paper trading in the sense that people try to replicate their account. They try to do a paper trading account that’s $5,000 and try to make positions as if they were in the real market. Well, the problem is that you’re not in the real market. In most cases, paper trading allows you to get fills much quicker than you would've otherwise, better pricing than you would've maybe otherwise. Look. You just frankly won’t ever have the mindset of actually trading real money until you have real money at risk. It's really as simple as that. What we can do though is we can use paper trading to our advantage if you're doing this one thing and this one thing is repetition. You have to be using paper trading for what it was designed to do which is practice. And so, if you think about the concept of football or baseball or basketball or any sport out there, when you practice before a live game, you’re going to go over maybe the same play or the same run or pass play. You’re going to go over that thing probably 100 times in practice before you actually maybe use it once in the real game. That's how you should treat paper trading. You should treat it with repetition. Here’s what I suggest people start doing. If you’re going to start paper trading and let’s say you want to learn how to trade credit spreads, I think that's great. Go out and trade 25 credit spreads every single day. Now, would you really make 25 trades every single day? Absolute not. You probably maybe don't have the account size to do it. You don’t have the stomach to do that. Maybe you just don’t even want to start with 25 trades in a single day. But on the paper trading platform, you have the ability to do whatever you want to do, so go out and make 25 credit spread trades today, price them all out, take your time with them, make sure they’re good risk rewards, make sure they meet whatever paper trading allocation requirements you have, keep it at 1% to 5% of risk, but get familiar with and get comfortable with the consistency and the activity around placing the trades. I guarantee after you place 25 trades, the actual act of placing the trade and pricing it out, seeing the thing go through a fill and then watching profits and losses start to come in over the next couple of days is going to make you more comfortable and more familiar with credit spread trades to the point at which you’ll start to see better opportunities than you would've otherwise. When people oftentimes… And to use an analogy in real estate, sometimes when people start investing in real estate which many of you know, me and my wife invest in real estate heavily. When people start investing in real estate, they often say like, “I don’t know what a good deal looks like.” The concept is – Well, you haven’t looked at 100 deals. If you analyze 100 different properties, you'll know what a good deal looks like. If you analyze three, you have no basis to figure out if this is a good deal or that’s a good deal. The same thing holds true in paper trading. If you make 100 or 25 or 50 paper trades of credit spreads or iron condors, you’ll get a much better understanding of what works better, maybe what order type or spread width works better, what ticker symbols usually pay the most amount of money. Over time, you’ll start to see which ticker symbols or strategies or setups pay the most at expiration, so actually turn profits, holding through 20 or 30 days. It just is a matter of repetition and time. And so, use paper trading and this repetition mode to get more transactions on, to get more familiar and comfortable with the mechanics of trading. And then when you go to the live game, when you go to real money trading, then you can pair it back, but you’ll have all of that practice in place, you’ll have all of those mechanics in place to know what to look for, so you can be targeted in your approach with a small account. You can go after particular strategies that you’ve seen. You can analyze 10 deals and trade one. That's the real power of paper trading and I don’t think a lot of people do this. Not to say that they do it completely wrong by totally acting like it's the real account, but they’re missing an opportunity here to get a lot more activity than they would’ve otherwise gotten in a real money account. Hopefully that helps out. As always, if you guys want to learn more about what we're doing at Option Alpha with regard to which strategies to use, what strategies maybe to start trading, you can check out our profit matrix report which is basically just the whole culmination of all the back-testing that we’ve done on different option strategies. It shows you when strategies work better than other times, iron condor setups, when to place them, when to get out, if you should use stop orders, the whole deal. You can check that out at optionalpha.com/profit and that’ll send you right over to the page where you can learn more about our profit matrix report. Until next time, happy trading!