Paper Trading OptionsPaper trading or virtual trading is a surprisingly simple way to practice the safe option-selling plan you generate for yourself completely risk free. It essentially entails following every step of your plan, except with fake money. You simulate making the trade, recording it on paper or digitally on your computer, and monitoring the trade as time passes and market conditions develop. You follow your options trade simulation each day until the option expires or until market conditions dictate that you need to exit the trade. You record you income or losses, then practice again until you feel comfortable enough to go live. Many of the online brokerages such as OptionsXpress have modules on their websites set up just for this. Once you feel comfortable with covered calls or cash-secured puts, you can then go live with you option-selling business, and virtually trade more advanced techniques you may want to employ later in your business. Is there a downside to paper trading? At first glance you might say not, after all it's fake money and you can't lose a cent. And that is true. But keep in mind that human emotions, especially fear and greed, will not come into play during paper trading. Some people find they make excellent "paper profits" when paper trading but subsequently do not fare as well upon going live. That is because the emotions of having real money on the line do indeed affect our judgement and decisions. The best use of paper trading is to become familiar with the mechanics of utilizing option-selling techniques in real time. This will give you the confidence to formulate a written trading plan which will guide your decisions when you go live with real money.
Return from Paper Trading Options to Your Plan
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