Trade The Journey

Trade The Journey

Paper Trading~

Top of the Morning. Close to half of the American population is vaccinated, and most states are close to being fully reopened. Around the country, people are returning back to work after spending over a year working at home.

Of course, not everyone enjoyed that privilege. States eager for people to return to work cut their social programs, believing that would encourage people to seek jobs. While some people may have been taking advantage of the social benefits, others needed the services as additional income.

Inflation has been the big buzzword influencing the market, as the Coronavirus cases trend down in the United States. Inflation is the increasing cost of things or a rise in prices as I understand it, which may be faulty. Inflation is a complex subject.

It influences the supply chain, business borrowing funds, consumer costs, and production. Inflation is a significant concern for the Federal Reserve because of its damaging effects. Inflation naturally occurs as the economy improves or when more dollars are chasing the same thing.

If there’s a limited amount of the material you need to produce a product, would you be willing to pay more? Yes.

If you need the product as other competitors do, would you be willing to pay more to secure your required amount for production? You bet.

The higher cost incurred in producing the product means a producer needs a larger amount to cover their costs. Unfortunately, the consumer ultimately feels the pain of this process.

Businesses are affected not only in the production process but also in the borrowing process as the Federal Reserve raises interest rates to combat inflation. Small businesses, potential homeowners, and borrows are more reluctant to take on loans with higher rates.

The Federal Reserve has several tools to influence the business cycle, like adjusting rates to affect borrowing and spending.

We are continually in a cycle of economic contraction and expansion, so we, as consumers, have to match our spending and saving patterns to the stage of the business cycle we are in.


Paper Trading:

I began paper trading two years ago. I can remember being confused and intimidated by my first trading platform. Thinkorswim is my favorite trading platform partly because of its on-demand trading feature. It allows you to revisit any day in the past and trade that day with no money on the line.

Paper trading is an excellent tool for developing a feel of the market. I’ve spent thousands of hours developing my trading skills and understanding of the platform.

Initially, I traded by trying to anticipate the next bar. A large green bar signaled that I should be long, and the reverse for a large red bar. It was a losing strategy that initially discouraged me from trading.

It took me a year to understand that you trade the pattern and sentiment. Once I started to earn a profit from paper trading, I learned how to place stops.

I can remember making a thousand dollars on one trade, paper trading. I felt like I conquered the world. It took me a year to develop the skills to make a profit in paper trading.

Previously, I thought that you had to be involved in every direction the stock moved to earn a profit. As you could imagine, that strategy is mentally exhausting and prone to large trading errors.

There had to be a better way to trade. I always knew that the right trade only required the right entry and exit. So instead of just monitoring the movement, I watched the pattern and volume.

After that day, I began to develop an intuitive feel for the market. These skills did not translate to the real markets; instead, I have placed mostly losing trades.

When I paper trade, I am profitable. When I trade with real money, I am not.

Trading with no money on the line means I have no constraints or regrets. I’m not worried about losing money or making a trading error. The outcome doesn’t matter, so I just trade without second-guessing myself. I completely trust my trading skills and I don’t need much evidence to place the trade.

When I trade with real money, I analyze the pattern, news, and overall market sentiment to assess my trade. I look for evidence that will help me develop confidence in the trade.

I’ll admit that when I have a position open, I continually look at my profit/loss statement. My emotions fluctuate based on the color of my position throughout the day.

When it’s green, I feel good about the trade and my trading skills. When it’s red, I feel doubtful and unsure of my trading skills. All of these emotions affect how I see the trade.

When I paper trade, I don’t feel any emotions. When my profit/loss is red, I feel that it’s temporary, and I’ll earn it back. When my P&L is green, I don’t feel anything; it’s just one of my many profitable trades.

I’m usually objective when paper trading, and I’m not personally involved in the trade. Feelings and labels are attached to my trading when I have real money on the line. I trade with other people because I consider how they feel about my trading and what I am doing with my life when I place the trade.

I also take my hopes and dreams into account when placing a trade.

I need to adjust my mentality so that I transform my trading. I need to release all of the attachment, resentment, and sense of self-esteem that I think trading will fix.

I need to go into each trade, understanding that trading will not fix the way people and I see myself. A trade is just that, a trade.

This mental adjustment, I believe, will help me transfer my skills from paper trading to actual trading.


Cash Flow Management:

Your cash flow is your lifeline. I was utterly unprepared for an emergency, banking on a large sum of money I earned being returned, and it wasn’t.

I thought it was a certainty, and I should know better. So, I had to cash out a large part of my trading account to cover the emergency cost. That hurt, and I saw it as a significant setback.

A setback is a setup for a comeback, so I decided to take this as an opportunity to reassess my trading system. As disappointed as I am, I believe that taking a break will ultimately be to my benefit.

I had a series of losing trading, so a break was perhaps necessary. I can also take this time to rebuild my savings account.

Grade: D-
Reason: Being unprepared for an emergency.

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