The No. 1 Trading Trick That No One Is Using

Editor’s note: Penny stock guru Tim Sykes has taken our business by storm. Many of our readers have already taken advantage of Tim’s strategies to secure their retirement. Maybe you’d like to join in but fear you lack the experience to succeed and you don’t want to risk your hard-earned money. Today, Tim has the ideal solution.

Brian MaherDear Reader,

I’ve made millions of dollars trading penny stocks. I’ve also showed countless others to do the same, and many have become millionaires following my teaching.

I don’t say that to brag, I’m just telling it like it is. I’m sometimes accused of being brash, but that doesn’t bother me.

Of course, I get so many questions about the best tricks and hacks to become a “master trader.”

I often talk about education, research, building a foundation. And I tell people to do what I’m about to tell you all the time.

Very few people actually listen. It’s only my best students who follow this advice.

But what if I told you there was a way to develop your skills as a trader, without risking actual money?

Well, the good news is there is a way. And it’s called paper trading.

Paper trading is a method of virtually testing out setups and strategies without risking the money in your actual account. It can be a great way to develop skills and gain confidence before you switch to live trading.

Maybe you’d like to start making money in the markets, but you don’t have the confidence to get started. You don’t want to lose a lot of money, which is perfectly understandable.

If that’s you, paper trading could be the ideal way to go. Today I’ll give you the 101 Paper Trading Basics. They could launch you on a highly successful trading career.

What Is Paper Trading? The two-word explanation? Simulated trading.

On the surface, paper trading is just like regular trading: You’re choosing stocks, putting in orders and watching what happens next to see if your trade is profitable or not.

However, the key difference is that you’re not actually trading with money when you’re paper trading. The transaction is completely virtual. No actual money enters or exits your account as a result of paper trading.

Technically, you could practice paper trading using the newspaper and a pencil and paper; that’s why it’s referred to as “paper trading.”

But nobody really does that anymore. In recent years, simulated paper trading platforms online have become the preferred way to do it.

On today’s paper-trading platforms, the look and feel is pretty identical to real trading platforms, so you can really get the feel and sensation of executing a trade.

Why Should You Practice Paper Trading? A lot of new traders roll their eyes at the very concept of virtual trading. If you’re not actually making money, why bother with paper trading?

Listen, I understand the desire to jump in and make money. However, there are many reasons paper trading is worth your time when you’re starting out, including:

  • Getting your feet wet. If you’re a new trader, the entire process of choosing stocks and executing trades can be overwhelming. There are a lot of factors to consider, and the pace is fast.

Once you actually start trading, there’s still a big learning curve. It takes time to get used to the motions and to be able to react confidently to the market’s movements.

If you’ve learned the basics of the market, how to do research and track stock patterns, and you have an understanding of how to execute a trade successfully, paper trading can offer the perfect stepping stone to live trading.

Paper trading offers you a chance to put what you’ve learned to work, applying your knowledge using realistic trading scenarios.

  • Saving your money. True, the fact that paper trading doesn’t risk actual money means you won’t earn anything through your efforts. But it also means that you won’t lose money.

Most traders lose money, especially early in their career while they’re still figuring out how things work. Because of this, I always suggest taking small positions, especially at first, so that you can gain some experience and insight on successful strategies before taking bigger risks.

Paper trading can offer you the opportunity to be a little less risk-averse in your trades to see what might happen if you were taking bigger positions. It can be a great way to test the waters without risking your hard-earned cash.

  • Trying out new setups. If you want to be a successful trader, you need to find an edge. This means you have to find your own unique way of choosing stocks and executing trades. Once you begin to find success, you can build slowly, with time.

While maintaining a trading journal can help you figure out and refine setups that are working, sometimes it may become necessary to try something new. For example, maybe the market has shifted and your old setups aren’t working anymore.

If you want to test out a new setup or trading strategy, paper trading can offer the perfect platform for it. You can try out your new setup and see how successful it is without risking real money.

This can be a great way to try new strategies and maybe even develop a new bread-and-butter setup.

Of course, there are some practical considerations when paper trading:

Paper Trade to Test Order Types and Market Conditions: To be a successful trader in the actual market or in paper trading, you’ll need to familiarize yourself with the different order types.

Order types include stop loss, limit and market orders. In paper trading, just as in real trading, you’ll need to choose the best type of order to suit the market conditions and your personal risk tolerance and trading style.

Paper Trade Accounts Versus Live Accounts: Paper trading is kind of like trading with training wheels. It can be helpful at first, but there will come a point at which you’re going to have to take the training wheels off and try to ride on your own.

If you get too accustomed to always using those training wheels, it becomes harder to divest yourself of them.

Since paper trading doesn’t involve real money, you’ll never totally get the full risk and reward experience that you will with trading. Since there won’t be any real risk, so you may begin to get a distorted sense of security.

While paper trading is a great tool, be careful about using it too long before you switch to live trading. Or, use it sparingly as you test out new methods of trading.

The Psychology of Paper Trading: Paper trading psychology can be complicated. On the one hand, it can help bring you up to speed and gain confidence as a trader. However, there’s always going to be part of you that knows it’s not real money.

So you may seem cool as a cucumber while paper trading, and then when you enter a real trade you might find that you begin acting in an irrational or emotion-fueled manner.

When it’s real money, emotions can get involved.

This is one of the reasons that I suggest switching to real trading pretty quickly, but keeping your positions small.

This is how you’ll begin to earn experience. By live trading with small positions, you may not profit a lot, but you’ll learn a lot about your personal risk tolerance and the true psychology of trading.

Now that you’ve got the basics of paper trading and how it can be extremely beneficial, you can try it yourself.


Tim Sykes
for The Daily Reckoning

P.S. I’m so confident in my strategies I’ve issued a challenge to all Agora Financial editors. And you could be the big winner! How?

Click here to learn all about it.

They say I’m crazy, but I’m doing it because I’m convinced my trading record is better than ALL OF THEM.

I reveal my personal trading record in this clip. It’s shocked a lot of people, and I think they’ll shock you too.

But for various reasons I’m taking this video down tomorrow, Sunday, at midnight.

If you do nothing else today, please watch this brief clipto learn more.
After all, you could be the big winner.

Remember, you only have until midnight tomorrow. Do you think I’ll win my challenge? Click here now.

The Daily Reckoning