Paper Trading System

Hello and welcome to the group!

We have endeavored to create and paper trade an Investools Method inspired trading system to experience creating and trading a plan from start to finish.. Each day you will receive an “Activity Report” containing current positions and any actions taken that day. We take turns tracking our group list off of which trades are taken based on the rules we have developed as a group and reporting to the group. One member takes control at two week intervals.

Our current group watch list can be subscribed to on the Investools website by searching for
“NJ PaperTrading” under All Public Watchlists.

The files we are using to manage this can be found here….
http://finance.groups.yahoo.com/group/NJ_INVESTools_Support_Group/files/Paper%20Trading%20Documents/

Current Investools Method Group Rules: Rules used to manage trades and portfolio.

Expanded Daily Discipline: Everything you need to do step by step to manage the group trading after turning on your computer and sitting down

Activity Report Blank: To be used by the person working the list to report any changes for that day. It will be easier to just copy and paste the previous report and change what needs to be changed. ** This sheet also serves to track what our account spreadsheet does not, such as stop losses and unfilled buy orders**

Activity Report Example: Same as the one above with what is needed in each space.

NJ Investools Account: Spreadsheet to track entered trades. (Updated every Saturday. Can also see positions in Activity Report daily)

Position Size Worksheet: For use in determining position size when an entry signal is given.

Once you have a grasp of what is going on with the paper trading please feel free to ask for a turn at doing the Daily Discipline and reporting to the group. It can be a cathartic experience for many new or struggling traders.

Here are some reasons and a small recap of the purpose behind doing the system based paper trading….

-We started off going over the importance of trend and time frame, using the right tools to identify these in price and indicators according to our goals. Then we went over the components of and reasons for organizing trading strategies into complete systems. The way our group rules are structured are the necessary components of ANY trading system. Since trading is a decision making process doing this provides us a base off of which to improve and refine the system going forward as we see the results. Without such a base it is hard to grow.

-The Group Paper Trades will always be faithful to the rules, in this way following our system provides an unchanging baseline for further discussion of other ways to trade the stock using different methods… straight options, spreads, different time frames, chart structures etc… Our intermediate term trend following system will keep its eye on the prize… the trend is your friend until it ends…. while we try to do all sort of things to the stock differently. Hopefully from this we will be able to see when it is the proper time to implement different strategies. In a strong trend, our group rules are certain to defeat all other methods. The group list also provides continuity to follow up on what we discuss so we can fully understand what has happened.

-We will see outright in real time the strengths and weaknesses of the Investools Method and our variations of it through different markets. See the strengths and weaknesses of the technical indicators, where they work best and where they give false or delayed signals. As we witness the Method work in real time we will notice the nuances in the chart and see the setups before they trigger.

-Discipline- This could unexpectedly be the best benefit from doing this. At the end of the day no matter how much we learn about trading, without discipline to actually do it day after day, year after year, it is all completely useless. The coach Dave Johnson often uses the quote from Cicero “The skill to do comes from the doing.” If we can maintain this as a group we will in fact be “doing” and will derive the benefits…. from consistently tracking stocks over time to organizing our daily activities for trading stock. Individually, those take turns doing the activity reports will have 2 weeks to see exactly how discipline really works after the question of how to trade is answered.

-New group members, those new to Investools or struggling Investools students can see a functional Investools Method based system, the rules and discipline to implement it, and the results. A common complaint is that Investools does not take us all the way to the complete system of step by step process of actually implementing the system… that is what we have done.

-Portfolio management: Controlling risk, position size etc… as our portfolio positions grow we will run into issues concerning which stocks to buy if we are close to fully invested, has our risk grown too large? Etc. The theoretical trader we are attempting to be with this system is an end of day trader placing orders for the next day after getting a signal. The “15 minutes a day” investor that Investools tempts people with in basic stocks.

So those are some uses…. and there is always the chance that we can work this system into a real cash cow that takes 15 minutes per day to manage. Hey… you never know.

I hope this is worthwhile for everyone.

Jim McCabe
Moderator, NJ_INVESTools_Support_Group
http://finance.groups.yahoo.com/group/NJ_INVESTools_Support_Group