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Why I’m Paper Trading

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
Updated 1/21/2026 5 min read
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I’ve been paper trading recently.

Yes, me. After over 20 years in the market. After $7.9 million in verified profits. After teaching thousands of students…

I’m still paper trading.

Why? Because I’m still not the best trader.

I have no problem admitting that.

Even after two decades, I’m just like you.

I’m still learning.

The market evolves. Patterns shift. New catalysts emerge.

And if I don’t adapt, I’ll pay the price.

The last few weeks have brought some seriously choppy conditions to the stock market.

Major volatility. Frustrating price action. Setups that would’ve worked a month ago are falling apart in real-time…

When the market gets choppy like this, I don’t force it.

I don’t try to throw darts into the void and “hope” it works out.

I go back to basics.

I let the setups prove themselves BEFORE I risk my hard-earned money.

I paper trade.

Champions Practice. Losers Wing It.

Think about the greatest sports teams in history.

The Patriots. The Warriors. The Yankees.

They didn’t win championships by skipping practice and showing up on game day “hoping” for the best.

They drilled. They ran plays. They scrimmaged against each other until the execution was flawless.

Paper trading is your scrimmage.

If you miss practice, you’re probably not gonna win the big game.

If you skip the reps, you’ll get crushed when real money is on the line.

Professional traders understand this. Amateurs think they’re above it.

Guess which group blows up their accounts?

How To Paper Trade The Right Way

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Paper trading allows you to test setups and patterns with simulated dollars. No risk. No stress. Just reps.

But here’s where most people screw it up:

They set up a paper trading account with a million-dollar balance.

Don’t do this.

Simulating millions of dollars skews your early views of the relationship between risk and reward. It makes you deal in large numbers that you don’t need to worry about yet.

You start thinking in terms of $50,000 positions. $100,000 gains. Numbers that have nothing to do with your reality.

When you then switch to real money with a $5,000 account, everything feels wrong. The psychology is completely different.

Instead, simulate a dollar amount that’s closer to what you’ll actually be trading.

If you’re starting with $3,000, paper trade with $3,000.

If you have $10,000 to work with, paper trade with $10,000.

Make it real. Make it relevant.

Looking for some inspiration to start your paper trading journey?

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Trade Your Strategy, Not Your Fantasy

Once your paper account is set up with a realistic balance, start trading simulated dollars exactly as you plan to within your strategy.

If your plan is to risk 2% per trade, risk 2% in your paper account.

If your strategy is to cut losses at -7%, cut your paper trades at -7%.

If you’re targeting 10% gains, take profits at 10% in simulation.

Don’t cheat. Don’t take shortcuts. Don’t hold paper trades longer than you would real ones just because “it’s not real money.”

The whole point is to build the habits that will save you when risking real money.

If you make solid returns during this testing phase, you might be on to something.

Your strategy has potential. Your pattern recognition is developing. You’re ready to scale up with small real money.

But if you blow up your paper trading account, you’ll know your strategy isn’t ready for primetime yet.

And that’s priceless (literally).

Much better to learn that lesson with fake money than real dollars…

Paper Trading Saves Accounts

Too many traders think paper trading is beneath them.

Then they lose. And lose. And lose some more.

Their account shrinks. Their confidence evaporates. They start revenge trading to make it back. And before they know it, they’re done.

Paper trading isn’t just for complete newbies… 

It’s for anyone who wants to win in this market.

It’s how you test new strategies without risking capital…

It’s how you build pattern recognition when the market shifts…

It’s how you stay sharp during choppy, frustrating conditions when forcing real trades would be a mistake…

Even after 20 years, I’m still using it. Because I’m still learning. I’m still adapting. I’m still trying to get better.

And if you’re not doing the same, you’re already behind.

Cheers,

Tim

 

 

*Past performance does not indicate future results

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity.
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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”