The Road to Successful Trading

Pros and Cons of Paper Trading 
 
According to Chuck Kowalski, a widely read financial journalist, there is a difference of opinion 
among many experienced traders on whether paper trading is useful or not. Some will say that it is 
not completely realistic since you don’t have any money at risk. And once your money is at risk it is 
a different ball game. Emotions cloud judgment, as fear and greed become your enemies. These 
points are valid, but the benefits of paper trading outweigh these issues.
Paper trading offers you the opportunity to get familiar with trading and to see if you are on the 
right track. It also allows you the opportunity to make adjustments to your trading plan before you 
put money at risk. Many traders often go back to paper trading when they are struggling as a way to 
get back on track. Overall, it is not the complete experience, but it is an excellent training tool and 
almost a necessity before you put your money at risk. 
 
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Chapter 9: The Emotional Aspects of Trading 
One of the least understood and most important factors trading is the emotional-psychological 
aspects of trading. Why is this so important? Just ask any experienced trader and they will most 
likely tell you straight out “you come face to face with yourself”. 
Yes, that statement is a bit cryptic but what it really means is that a trader is totally and utterly 
accountable for his/her success. Now, that doesn’t sound too challenging but we live in an era 
where the word accountability has lost much of its meaning. We see it in government, business and 
in our personal lives. Who is to blame when things go wrong? Is it even politically correct to accuse 
anybody of being responsible for anything? As we speak, some school districts are even trying to do 
away with a grade of “F”!
Perhaps its an over reaction to a more traditional war era generation (World War II) who still 
believed in narrow definitions, discipline and self reliance but times seem to have moved on for 
most of today’s modern societies. Some may say that the decline of the Western Civilizations is a 
direct result of new liberal “humanistic” values. But to the trader, the trading account shrinks or 
grows as a direct result of their decisions. No excuses. It is what it is. The market could care less if 
you are a nice person or not. Trading is totally a cold Darwinian undertaking and not for the weak 
of heart or the grandiose of ego.
Let’s talk about ego. In most western capitalistic societies (where most traders reside), we are 
taught that if you want to be a success you must not fail. In some cases, if you have even the 
slightest blemish on your record you are automatically shoved to the side. It is indeed a paradox; a 
society that worships success but not accountability. How can you have success without 
accountability? The answer is starting to make itself apparent in the corruption and political 
decision making nature of our “leaders”. Nowadays, it seems to be who you know not what you 
know. But not for the trader. The market could care less. You make the right decisions or you are 
toast.
 
This clarity makes many people nervous. You see, as a trader, everybody is a loser at one time or 
another. There is no escape from this fact. No amount of schmoozing, glad handing or past history 
of performance shakes the market’s judgment. Either you do or you don’t. Period; end of story. 
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To most in our consumer societies, losing money only amplifies losing. In most modern societies, 
money seems to be the measure of a persons worth. With it, you are somebody. Without it, you are 
nobody. And what makes it worse is that most people believe it! 

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Not only can losing be a painful experience for most, but the loss of money equates with loss of self 
image and a certain standing in the world. You see yourself as a loser; not worthy. Losing money is 
a shameful event for many and represents some personal flaw. Not so for the trader. If they believed 
this tripe, they would not be traders. 
A trader understands and believes that a trading system must have a fairly reliable win-loss ratio. It 
has been tested and tried. If a trader has a system that should yield a 70% win-loss ratio, it is 
expected that out of every 10 trades a trader will lose about 3 trades. The trader expects that to