If you choose a simulation strategy that has a defined number of setups, a fairly specific strategy for limiting losses, and you stick to that strategy like glue, never deviating from it – then simulated trading is a logical way of testing your method in real time and it will help you greatly. So begin the successful part of your trading career with a simulated strategy that you personally have learned to trust through real-time trading.
If your simulation trading strategy isn’t making you money consistently, in “real time”, you can’t have confidence in it. Trading psychology involves building confidence, and consistent, profitable results will lead to more confidence.
Trading psychology also involves self control, and developing confidence while using a simulation method will help you when you’re ready to trade for profit. How can you tell if your method is any good when you don’t yet have the nerve and discipline to paper trade it?
Any strategy that loses more than 60 % of the time (such as a counter trend trading system) will take enormous courage to trade, no matter what you do. But if you win, you win big. These strategies fit a certain type of person. It takes courage to go against the crowd (trend).
A trend trading system wins more than 50 % of the time. It requires you to sense when the trend is about to end. If the trend change and you can’t get out, it will lead to huge losses.
I trade around Supply and Demand levels (a range trading system). After a run-up or run-down, the market will get into a range (consolidation).