Moving from paper-trading to real trading

roarflolo said: "I've been paper-trading with TOS for a while and will move to real trading in about a month. Any advice for the switch? Any real-trading quirks not apparent when paper-trading?"

Rbreb13 said: "[QUOTE]Any real-trading quirks not apparent when paper-trading? [/QUOTE]Only one I know of is [U]emotions[/U]. When you start using real money everything changes. Starting small was what helped for me. Even though the profits were small using less $$, so were the losses! The most important thing in trading is money management. Having a written out plan of attack will also help. Just jumping in without a plan is dangerous. Also keep a journal of all your trades so you can look back and see what you did right/wrong. I keep track of every trade I make, the reason for it,entry/exit strategies and my every thought about it."

roarflolo said: "Right, I can imagine a higher pulse when a real-money trade starts moving against your expectations. :dazed052: I've been keeping a paper-trading log where I've commented about my assumptions, mistakes, etc. so it's educational when I read what i did and why. Any guidelines as far as money management?"

Rbreb13 said: "[QUOTE]Any guidelines as far as money management?[/QUOTE]Thats a tough one. It'll depend on your risk tolerance. It also will have to do with your trading style. Main thing is to make more than you lose. Cut your losses quickly and let the runners run. Learn how to set stops but be careful a normal days volatility won't take you out. Maybe some of the other guys will have more insight."

drdan said: "As you probably realize from paper trading, options move very fast and can fluctuate %-wise a larger amount than stocks in a trading day. Keeping this in mind this is my money management rules. On straight plays - no more than 10% of my account in any one trade. Stop loss of 50% or if my trade does not move in the direction I thought in the first three days I reevaluate and most likely close the trade depending on my reevaluation. I also buy at least one month out and I purchase in the money strikes to eleviate some of time value loss. On Spread trades - no more than 25% in any one trade, no true % stop loss as adjustments are made when the stock reaches a certain price up or down. And always be prepared to lose the entire amount and that can happen very quickly with options. Options are only part of my investment portfolio which is why I am willing to risk 25% of my options account on one spread trade. What money management rules did you have while paper trading?"

roarflolo said: "I used as much of the account as I could, leaving about twice what I would need to buy back my positions at my predetermined "oh shit" point (around the short strikes for an Iron Condor). My reasoning is that as long as I have enough cash to buy back all my positions I am "safe". I'm using conditional orders to buy back the positions so I am pretty sure about my maximum loss. At least I think I am sure. I paper traded through the end of February pullback and it worked out but that is the worst I've gone through so my experience is limited. Perhaps some huge, instant move could wipe me out?"

roarflolo said: "Execution seems to be different (not really a surprise) I'm using TOS and I see the following in the working orders: CREDIT 2.25 LMT 2.275 DAY WORKING CREDIT 2.20 LMT 2.250 DAY WORKING ...still not getting filled... what's up with that?"

Delta said: "The thing that most often frustrates novice options traders is skew. I'd recommend reading up on the various types of skew (investment skew will probably be the most relevant for you) and how they perform in the marketplace. I've lost count of the number of people who've contacted me distraught over the fact that their calls lost money as the stock rallied. A quick overview of skew will prepare you for this eventuality and how to profit from it."

roarflolo said: "Yeah, I'm sort of figuring it out. I've done more research on the bid/ask spreads around and I've found that I'm being a bit greedy too :-) It's just frustrating to give up .10 after .10 after .10 when you've set your eyes on the MID price, even if the credit/margin ratio doesn't very change much at all. :whacky011: I found this article ([url]http://www.theoptionsinsider.com/tradingtechnology/?id=112[/url]), did you write it or just quote from it?"

holzie said: "It really depends a lot what you are trying to get filled on. If it's electronically traded on multiple exchanges, you have a great chance to get filled at or close to MID, but if its something like SPX - good luck :)"

holzie said: "Oh yeah, didnt answer your original question. DrDan pretty much nailed it for general application. But you have to adjust for this market and this market is tough for ICs. So if you still want to do them, make your sizes even smaller. My 2 cents."