Why Paper Trade?

Why do we paper trade? It is because 90% of people who trade the stock market fail to make money. Why is this? Traders do not understand the stock market and/or cannot read a stock chart. To be a Great Trader, is to own a business. In business 95% of businesses fail. Could we learn to succeed in the stock market based on why business leaders fail, of course!

People who fail in business fail because they are too concerned about making money and what other people think rather than to spend time to understand and make their products work. In any business, you must seek mentors and learn all you can to achieve maximum profits; this is the same in the stock market.

In the stock market money is secondary to your product. What product you ask? You're trading system!

Every business has one equation they must answer. Lucky in the stock market the equation and product are one in the same. Okay, here it is.

income-expense=profit

Most of you are saying to yourself "Of course I want to make more money than I lose!" Unless you can prove you have solved the equation it is best not to trade at all.

Here is how this formula will look to traders.

(average win)*(% wins)-(average loss)*(% loss)= profit

According to this, if you win only 30% of the time and you make 3 dollars every time your right and loose 1 dollar every time you are wrong. You're equation would look like this.

(3)*(.3)-(.7)*(1)=.2

It's positive, it works and I guarantee you if you can work on perfecting your system you will be successful.

You can also try to be right 80% of the time and win the same amount as you lose. This equation would look like this.

(1)*(.8)-(1)*(.2)=.6

That is positive and it works!

That is your goal when you start paper trading. Solve the equation. Don't trade real money unless you can solve it and follow it.

It is important to develop a system to gain confidence on trading the market. It is very, very important to paper trade before live trading. Paper trading can be an effective tool even as you learn your system, strategy and formulas.

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