Why you must paper-test your strategy?

So you have devised a unique trading strategy for yourself and are excited to try it. However, you hold back for the fear of losing your money. Well, it’s only rational to think this way.

Before you actually go live with your trading strategy, it is important to test your strategy. One way to do so is in a virtual environment through a process known as “paper trading”.

Paper trading is essentially a practice of trading in a completely virtual or simulated environment.

The term “paper trading” came into being from the time when traders would mark their strategies on paper and compare it manually with the movement in stock prices to examine their robustness.

With paper trading, you do not need to actually invest your money as the entire trading environment is simulated.

So, anything that happens within paper trading will not affect your trading account or the stock market. Paper trading simulates real-time values of the markets and allows you to test your trading strategies and test them.

Paper trading is a must, especially if you are a beginner considering that it is your hard earned money that you deploy in the markets. In fact, it is advised not just for new traders but also for experienced traders to test novel strategies and ideas.

Here’s why you must paper-test your strategy before deployment

1. No risk involved

When you paper-test your strategy, it essentially costs you nothing. So, if you make a terrible trade, you cannot lose money. You can use the trade to identify flaws in your strategy and ensure that you do not repeat them during live trading, which further reduces your risk.

This can help you gain valuable initial experience as a beginner, and your hard-earned money stays with you while you practice your strategies.

2. No stress or emotions involved

Emotions are a large part of trading, especially for beginners. A lot of times, it is your impulses that cause a poor trade and not your strategy. Paper-testing your strategy does not allow your emotions like greed, fear, and panic take over. This allows you to stick to your strategy.

With enough paper trading, you may in fact gain control over your emotions and be able to keep them in check during actual trading. Thus, paper trading serves like mind training!

3. Gives you adequate practice and confidence before deployment

Paper trading gives you the much-needed experience you need before you actually start trading with your hard-earned money.

This prepares you thoroughly before you deploy your strategies. It also gives you enough room to make mistakes and helps develop confidence to trade in the live markets.

4. Boosts creativity to try out new strategies

You may have come up with an experimental strategy that may be hard to implement considering that you have never tried it before.

However, with paper trading, you can literally simulate any strategy under your belt. This particularly helps when you do not have any statistics on the strategy’s performance.

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Paper trading is not just for beginners but also for experienced traders who have lost touch with the market. Every trader goes through periods of losses, which can affect their confidence. Paper-testing can be a lot of help with regaining your control on emotions and your confidence before you dive back into action.

While earlier, traders would test strategies on an actual paper, today, a lot of platforms offer simulated trading. PHI 1 offers a superior simulation experience that can help you paper-test your strategies before you get into the real deal.

All you need to do is create and save your strategy on PHI 1, enter the strategy you want to use for paper trading, choose an instrument, set testing parameters and amount, and add risk controls. You’re all set to drive a trading simulation using PHI 1.

Also, PHI 1 enables limitless creation of strategies with its form-based and multi-symbol strategy creator, and standard as well as calendar risk controls, taking your algo trading to the next level.

PHI 1 aims to set the trader free from the daily mundane tasks by automating them, so traders can focus on exploring opportunities in the stock market.

Whether you’re a beginner or experienced trader, paper-testing refines your trading game. With PHI1, you can paper-test your strategies with ease.

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5 common mistakes every trader makes and how you can avoid them

It’s ok to be wrong; it’s unforgivable to stay wrong.” – Martin Zweig

Contrary to what many beginners believe, trading is not a way to make ‘easy money.’ While a lot of glamour has been associated with the trading world, it is only those who research, gain knowledge, and learn from their mistakes that truly flourish as traders.

Of course, experienced traders make trading mistakes, too. However, simply repeating trading mistakes would be unwise.

Here are 5 common trading mistakes you can avoid while trading:

1. Not having a strategy

Failing to plan essentially translates to planning to fail. Whenever you decide to trade in the market, always back it up with a solid strategy.

Jumping into execution without a plan will catch you like a deer in headlights amid an adverse market movement.

How to avoid:

Make sure that you at least determine your entry and exit points and put risk controls in place.

Further, run a paper test in various conditions to understand the probability of your trades winning in various market scenarios.

Also, you may go through your track record at the end of each month to learn from your trades. PHI 1 allows not only the creation of strategies with its multi-symbol strategy creator, it also enables backtesting and bulk testing for multiple market scenarios.

This can help you have a robust trading plan and be confident in your live trades.

2. Failing to cut losses

Okay, you got into a trade and it did not go as you expected. So, you keep hoping against hope that it will work out?

To give your trade more room to work in your favour, you even start moving your stop loss further. This is a common trading mistake!

How to avoid:

If you hit the stop loss, it is a signal that you must take the loss and exit the trade. Basically, it is all about sticking to your plan.

With PHI 1, you can not only set standard risk controls but also various calendar risk controls, which takes substantial stress off you while you trade.

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3. Getting emotional

One of the primary mistakes traders make is getting too emotional about their money and trading skills. Many traders expect to consistently earn profits from their trades and do not accept that trading is a mix of good and bad days.

Further, if a trade goes against them, they doubt their knowledge and research skills. If a trade works in their favour, they get overconfident, indulging in reckless trading.

How to avoid:

While trading, ensure that you steer clear of your emotions and biases. Automated or algo trading can solve this problem.

Once you devise a strategy and set it in motion, the algo trading platform takes care of your trades. You can now trade without the interference of your impulses.

4. Over-leveraging

Leverage can be a powerful weapon because it allows one to trade in sizes that are larger than their capital. Thus, you can borrow money to enter a transaction that is much bigger than your cash balance.

However, misusing leverage or over-leveraging is the single biggest reason for traders to shut shop. Leverage trading or margin trading can be addictive, however, remember that leveraging comes with a price.

Further, with the size of trade being huge, the potential for loss also becomes huge on leveraged money and can lead to stress and impulsive decisions.

How to avoid:

Be cautious while using leverage. Use only if your strategy is tested and has delivered consistently.

Also, ensure you stick to your trading plan with a strict stop loss. Remember, leverage is a double-edged sword. It can amplify profits but can also maximize losses.

5. Not diversifying trades

Common mistake traders make is concentrating their entire trading capital into one stock or security or taking similar positions in highly correlated assets.

This can literally wipe off your entire capital with an adverse movement in that asset.

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How to avoid:

It is always wise to diversify your trades among multiple stocks, instruments, asset classes, and even markets. This way, a loss in one position can be offset by another, especially if your positions or assets have low correlation.

Have you committed any of these mistakes? Don’t fret! These mistakes are ‘common.’ In fact, every trader has made these mistakes during their trading journey. However, it is essential that one learns from these mistakes in order to move forward in their trading career.

Whether you are a novice or experienced trader, PHI 1 can take your trading up a notch with its many features. Still doubt it?

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5 benefits of PHI 1’s Form-based Strategy Creator

“I know where I’m getting out before I get in.” – Bruce Kovne

Strategy creation is at the core of trading. A safe trade is made when the underlying strategy is solid and is well-tested for robustness. Further, sticking to a trading strategy enables you to stay focused amid volatility, noise and also, your impulses.

PHI 1 offers an advanced strategy creator that allows traders to create any type of strategies—even arbitrary ones. This enables the trader to explore novel ideas and exploit more opportunities in the market.

Further, PHI 1’s form-based strategy creator is simple to use and can be combined with superior backtesting available on the platform, so you can trade with less stress and more confidence.

Here is a detailed look at the top 5 benefits of PHI 1’s Form-based Strategy Creator:

1. No need for any coding knowledge and access to actual code

Coding is perhaps something that bothers most traders, as it can be scary for many. With PHI 1’s form-based strategy creator, you can trade with no coding knowledge.

Thus, if you want to create complex quant or price-action-based strategies, you can create a basic version of your strategy using our Form Mode and switch to Code Mode.

You now have access to the actual code, which you can use to refine your strategy. Currently, none of the existing Form-based tools provide this access because of the sheer complexity.

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2. Create and backtest all types of technical strategies super quick:

With PHI 1’s form-based strategy creator, you can create any type of strategy within minutes. In fact, there is no limit to exploring strategies with PHI 1.

All you need to do is select a template if you wish to, enter entry and exit conditions—you can enter multiple conditions here—and choose from the multiple indicators available. Next, you need to set your stop loss and target profit percentage.

You can name your strategy and save it for future use. You can then backtest your strategies on the platform itself.

3. Explore new strategies with 120+ technical indicators:

PHI 1 offers 120+ technical indicators to choose from—from moving averages to Bollinger bands to RSI, you can select your preferred indicator. This choice truly gives you the space to explore new strategies and have greater control on your trades.

4. Add Exit and Square-off conditions to strategies easily and quickly:

As a trader, it is extremely important to set exit conditions and stop loss to book profit. This is because although you have employed your research and trading knowledge into your strategy, markets can be quite unpredictable.

With PHI 1’s form-based strategy creator, you can set an exit condition easily by simply selecting the indicator and adding relevant values. Further, you can also set the stop loss and target profit percentage easily

5. Backtest and simulate strategies within minutes

Limited tools are presently available for bulk backtesting. Backtesting is a necessity for traders before they place actual trades as it helps identify scenarios where your strategy might not work.

PHI 1 offers bulk backtesting along with auto-analysis of your strategy’s performance. Thus, your strategies get scored in various market scenarios such as volatility, market crash, and trending.

You can also simulate your strategies in live markets. You can, therefore, trade without worrying about how your strategy will perform in extreme market scenarios. That’s half your worries erased!

With PHI1, perhaps, the unique feature is that it is a unified algo trading platform. Because our platform is a fully automated trading system, your orders are directly sent to your brokerage account. Hence, you need not press buttons each time a signal is generated.

Also, our team offers robust support for coding strategies and also a comprehensive “Learn” section comprising comprehensive coding guidelines, which is open for access to all our users. You can also make the most of our webinars that are aimed at simplifying algo trading for you using PHI 1.

You can watch a demo of our form-based strategy creator here

Make the most of our form-based strategy creator and unleash your trading superpowers.

Try PHI 1 for free today!


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