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Paper trading refers to the practice of tracking trades on paper that haven’t been traded in an account. Professional traders tell you that paper trading isn’t the same as putting real money at risk on the markets. As a professional trader, I totally agree. The emotional roller coaster involved with making and losing money can’t be matched in a dry run. But if you’re a novice who’s just starting to understand the ways of the market, I think that paper trading is a great idea. The risks are nil, and the educational benefits are outstanding. Even with more than 25 years of trading experience, I still tend to paper-trade new ideas or systems for a while before putting real money to work.

For those who try paper trading but lose interest because they have no skin in the game, I suggest making a very small trade in a live account. The size of your trade and the risk you’re taking to try out a new strategy should be inconsequential relative to your net worth.

If you’re new to trading, test your trading ideas and refine your trading strategy by signing up for a trial account online with an electronic broker. (You can read all about electronic trading resources in Chapter 4.) All you stand to lose are a little time and some pride. But that’s better than jumping right into a live trading scenario and getting taken to the cleaners!