Be cautious as you transition to real money. You don’t want to start this journey feeling like you need to catch up your retirement in one or two trades. That kind of pressure will cause you to make mistakes. Success takes time and patience as you persistently follow your rules for entering and exiting trades.
Hopefully your success in paper trading gave you confidence in your chosen system. But using real money changes things. Show patience as you begin by starting out using just a small portion of your account even though you may feel a need for massive returns. Open small positions and then closely manage your trades using your rules. Risking a small amount of real money will create the same emotional reactions as using larger dollar amounts.
At this point, it’s not about achieving massive profits or bragging rights. Smaller positions sizes are a safer way for you to understand and better prepare for your emotional responses to the wins and losses you’ll see when following your system.
It can be hard to discipline your emotions even as you place your first trade let alone as you watch your trade move up or down in value. If you find yourself in this situation, let us encourage you to simply, “keep calm and carry on.” Starting with smaller sized positions helps you focus on developing the emotional control to follow your process without risking too much of your capital. And as you gain more experience and confidence in your ability to follow the rules regardless of position outcomes, increase your position sizes.
We like to tell people to be patient before the trade and to be patient in the trade. It might be tempting to break your rules and chase after stocks. But don’t allow yourself to enter positions outside of your rules. The market will come back and there is always another opportunity to follow your rules for entries.
The same desire to break rules may come once you are in a trade. Sometimes the memory of previous losing positions is so strong that it becomes more tempting to get out after a small profit just to avoid a possible loss. Don’t break your rules for exiting a position. Give the position time to develop and let your profits run until your system tells you to get out of it.
Putting your money to work in the markets successfully is a great way to increase your wealth and have a more enjoyable lifestyle now and in retirement. But don’t get so caught up in that dream that you rush into poorly conceived trades. Be patient, follow your rules, discipline your emotions and stay consistent.