BECOMING A TRADER

The first installment of a series of related articles.

The first nervous steps.

You've read a few tutorials, looked up some websites, and you would like to try your hand at this trading game.
For a few years you have made regular bets on your particular sport of interest -- horseracing, football, etc. On the rare occasion you may have made a Lay bet. Now you would like to execute a few "trades" on sports about which you consider you have a certain level of knowledge.

Immediately two options present themselves.
Do you "paper trade" or jump straight in with "real money" -- albeit in very small amounts to begin with.
Experts and commentators in the trading field are equally divided as to the merits of paper trading. No doubt trading with virtual money in a simulation mode does serve as a good learning process with no risk whatsoever to your capital. You cannot lose money. With paper trading you have a risk-free environment to put into practice what you have learnt, to test your ability, to try out different strategies.

On the other hand, the risk-free element of paper trading can mask the realities of trading in a real money situation.
If I gave you £1,000 to trade, would your trading behaviour be the same as if your were trading -- and risking -- your OWN money? Would you be more flippant and adventurous if your own money was not at risk. In real money trading you will most likely incorporate a stop-loss mechanism in your strategy whereby you will get out of a trade if it goes against you. Paper trading, conversely, will usually see you "hang in there" until the price recovers and comes back to your position for a profit. Emotion and fear are absent in paper trading -- in real money trading they are always present.
And finally, does one really learn from one's mistakes in paper trading. Or if we do, is it quite possible that we learn MORE from our mistakes when trading with real money? Human nature being what it is, we learn more from mistakes that hurt us financially than those mistakes which cost us nothing at all.

There is a middle way, and it is a route I would recommend. Begin your trading adventure with minimum stakes in a real trading environment -- £2 each trade with a stop loss of 5% giving you a typical up-and-down spread of two ticks. A losing trade will cost you ten pence at the most.

If you are running a 32-bit computer (doesn't work on 64-bit machines) and If you would like to try simulated no-risk-to-capital trading, there is an excellent real-time Betfair simulation platform from "Betfair And Square" available for Free download HERE.

Tomorrow .............. making the jump from paper trading to real trading.