One of the questions I get all the time is, “Do I really need to paper trade before moving to small money trading? I don't really like paper trading. I just want to get right into the money.”
The thing is, in order to make money, we need to learn what we're doing and how to do it well. Paper trading and small money trading are two different stages in the life of a trader and they serve different purposes. You have to identify which stage you’re in.
Ask yourself this question: Am I confident in what I'm doing?
If the answer is no, then you should definitely still be in the paper trading stage of your journey, because the purpose of paper trading is for you to be comfortable with the mechanics.
If you can answer the question and say, “Yeah, I know what I'm doing, I feel comfortable with this,” then you're ready for small money trading. This stage is important because now, you've got money on the line. You need to learn not only how to implement the trade, but you need to learn how to navigate the emotions involved with trading. If you’re in this stage, you should be asking yourself, “What do my emotions do when I've got money on the line that I could lose?”
So, I always tell people not to try to skip any stages in their trading journey. Start with paper trading. When you're ready, move on to the small money trading, get to know your emotions. Work through each stage, and you’ll be in better shape.