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Stock Market Training: Learn How to Paper Trade - YouTube

Channel: ClayTrader

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hey it's clay trader at clay trader comm

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one of the more common questions I get

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and quite frankly one of the most

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important things out there in trading as

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a new beginner or ez even as a veteran

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if you're trying to learn a new strategy

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or implement some new things into a

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strategy is paper trading so a lot of

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questions I get revolve around what is

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paper trading what do you mean by paper

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trading at this point in time now it's

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also virtual trading things like that

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simulators but I'm just going to talk

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about it from the old kind of old-school

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perspective of paper trading and all

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paper trading is is focused on one word

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fake money you are taking money that

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doesn't exist and you're just saying I'm

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going to buy stock or I'm going to do

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this with the money so basically at the

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end of the day it's like you're playing

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pretend you're like a kid again and set

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a plane you know cowboys and Indians or

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cops and robbers I don't know what girls

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play sorry princesses and princesses I

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don't know but regardless you've got to

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use your imagination and you're just

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going to say okay time to put on my

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imagination hat I want to pretend like

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I'm either buying or doing whatever with

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the money so all you're doing is writing

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down what you want to happen what you

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think is going to happen into a diary on

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paper and then you're going to have a

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paper trade but things get a little

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convoluted here because most times

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people make life too easy and I'll

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explain more what I mean by that but as

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paper trading we want to make life as

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difficult as possible we want to tilt

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things against us that way we know that

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if we can make it work when we're trying

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to you know turn all the odds against us

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then that just increases our

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probabilities that will actually work

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when we're putting more real money on

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the line so what do I mean by all that

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well let's just say that you're looking

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at a stock and this is your diary you

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say you know what I see a stock I just

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learned let's say I just learned how to

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use charts and looking at the chart I

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think that it would be a good buy at

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let's say $10.50 so that's what you

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could literally write down in your diary

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right there these four columns you want

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to buy based on a chart may

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it's based on something else again that

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goes back to well what sort of strategy

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are you trying to implement think about

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it that's the beauty of paper trading is

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you can test you can tweet you can do

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all the stuff and it doesn't cost you

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any money your risk is zero because

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you're not actually putting any real

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money on the line that's a powerful

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thing about it and you know that's

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what's frustrating is so many people

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just skip over it I understand why

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because I did the same thing oh I just

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signed up with the online brokerage I

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can't wait I want to start to make money

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well you know you hold you know kind of

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put the brakes on a little bit you got

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to learn what strategies work how do

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your rules fit into a strategy and

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that's my paper trading so powerful so

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to get back into it you've learned

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charting for example you have a strategy

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that you want to test that with some

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rules so your strategy and rules within

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charting says okay bye at 10:50 now does

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the what happens if the price hits 10:50

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most people will say okay write down

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what actually happens I got in at 10:50

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but the problem with that is you're

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being too easy on yourself because in

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the reality of the situation the price

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could hit let's say you want 100 shares

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the price could hit 1050 but maybe

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whoever is selling at 10:50 only sold 50

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shares so did you get every single share

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you wanted no you didn't but on paper

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you did but in reality you want to nap

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so how can we a you know avoid this sort

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of thing otherwise known as partial

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fills well whatever your want price is

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the price has actually got to hit below

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it in a reality now what that amount is

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whether it's two cents three cents five

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cents you know if it's a hundred dollar

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stock it would you know probably 15 20

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cents but for this let's just say three

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cents so in order for you to write it

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down in your diary that you actually got

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this price the price in reality is going

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to need to hit 10:47 when the price it's

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10:47 that means for sure you would have

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gotten your 10 50 in reality because it

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went actually below there in reality so

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on paper you know that okay it's being

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safe so therefore now you can write down

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over here okay got my order and at 10:50

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so again if in reality the price it's 10

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51 well of course you're not going to

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write it down over there but even if it

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hits 10 50 do not write it down over

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here because you just don't

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No is that realistically possible were

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there enough shares that actually were

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sold at that level so you can make that

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10 47 1048 1045 you know that's up to

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you but the point being you don't want

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to leave it the exact price now on the

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flip side let's say you know it I want

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to sell at 1050 so totally separate

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example but this time your strategy says

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okay I'm looking to sell at 1050 now in

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order for it to actually have happened

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on paper and write that down you want in

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the reality of the situation maybe

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already know where I'm going but you

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want it the price to hit 1053 if in

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reality the price hits 1053 then you can

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write over here okay yeah I sold those

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shares at 1050 again just because in

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reality if it hits 1050 exactly maybe

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you want to sell 100 shares but maybe

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the seller at 1050 is only selling 50 so

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in reality that would be reflected in

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your order you'd say oh I only got up I

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only got 50 shares maybe wouldn't have

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gotten anything because you're competing

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with somebody else but if it hits 1053

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then you know that the price cleared

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through all the 1050 sellers and you

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would have been actually able to sell at

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1050 again making their lives difficult

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on ourselves you're only writing it down

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as a 1050 sell but in reality it

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actually went higher just like when

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you're buying you're only writing it

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down as a 1050 buy but in reality went

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10:47 so when you do your calculations

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you it's going to be tempting to say

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well you know it actually hit 1053 maybe

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I should use that as my exit point that

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way it makes my paper trading look a

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little bit better no don't do that don't

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fall into that trick because that's

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where people get themselves into trouble

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they start assuming best-case scenarios

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for everything that's what we are trying

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to avoid we want to assume bad case

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scenarios we want to assume that it

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needs to actually go higher than what we

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want so let's say again another example

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you want to have a stop loss if you

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don't know what I mean by stop-loss go

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learn about them right now or else go

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donate your money to charity because you

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have no

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success at trading and I'm not trying to

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be funny really mean that so stop-loss

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again if you don't know what that is go

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figure it out immediately so let's say

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your stop-loss you buy in at ten fifty

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and let's say you want your stop-loss

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tip to be ten let's just say thirty

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eight stop-loss means that if the price

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hits it you are getting out in order to

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mitigate risk so if the price hits that

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you're selling and you're selling for a

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loss but now what needs to happen in

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reality

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for this to be counted as a loss maybe

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you know where I'm going but if the

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price actually hits ten forty one you're

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out you write down over here sorry paper

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it was a 1038 loss and you know what in

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reality it may never hit that it may

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never hit that but it doesn't matter we

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want things to be difficult because just

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because it could drop down we want to be

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a little bit more so that way we can be

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extra sure that yeah we would have put

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in a stop loss here and the lowest ever

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went was ten forty five so we were you

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know we were even tilting things against

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us and it still worked out when you can

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do that again making bad situations

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tilting things against you then you know

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that Wow my paper trading you know I'm

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tilting everything against me and things

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are still working out yes it'll get

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frustrating because sometimes the price

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will come down here and they'll it'll

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hit you know ten forty and you'll say

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would no it hit ten forty but my

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stop-loss in reality was really ten

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thirty eight yeah yeah I understand but

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it's hard to explain unless you've

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actually had money on the line but it's

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just different it's not quite paper

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trading you know paper trading as much

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as I wish it could say was a perfect

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translation over to actual trading it

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just isn't but a great easy way to make

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it a more seamless transaction is by

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doing what I've been talking about so

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again when you're looking to buy you

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want the price to actually go below

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where your actual entry is in reality

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when you want to sell you want the price

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in reality to actually go a little bit

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higher and then for stop losses you

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don't want the price the price doesn't

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need to go as low as what it would

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originally do in order for it to trigger

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you off so you know keep that in mind

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leverage things against you don't assume

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the best assume the worst and when you

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do that paper trading is going to give

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you more realistic results realistic as

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in perfect not perfect but it's going to

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give you more confidence because like

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I've been saying and reiterating if you

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can make it work when things are tilted

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against you then you have that much more

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probability to succeed when things are

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just actual when bullets are really

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flying and money is at risk thanks for

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watching I hope you enjoy this video I

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hope you found it helpful and I hope

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that you first and foremost actually

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know what paper trading is now and I

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know this may not sound like the most

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exciting thing to do especially when

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you're making your life more difficult

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but trust me I if you can make it work

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in bad times then you're just setting

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yourself up for probabilities of success

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with actual money on the line if you

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like this video and you're watching this

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on youtube please click the like button

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down below leave a comment let me know

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from people that watch the videos if

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click the share button up above and

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