Virtual stock exchange - am I any good at this?

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It's been mentioned a few times on here that people who want to become more familiar with trading stocks should consider opening a free account on a virtual stock exchange that uses real stock quotes but with pretend-money. This is often called "paper trading" as you just record your buy and sell prices on a sheet of paper, without handing over any real cash - or receiving any back when you sell!

Here's a neat little piece of software that retails at under $100 where you can record how much you spent, and then how much you made or lost when you came to sell. So now its real easy to paper trade on a spreadsheet and it'll do all the sums for you.

Looking at the summary figures at the top of this post, would you say this person had a good system for trading stocks, or a poor one?

The key figures I'd concentrate on at first would be these:

15 winning trades that on average return $150 profit, to be set against
10 losing trades that on average cost him $170.

Doesn't seem too great does it?

How about this trader's results, in the screenshot below:

201 winning trades averaging $32 profit, set against
86 losing trades costing $26.

That seems much healthier, don't you think?

Along the top edge of that screenshot you can see the URL if you'd like to watch an explanatory video in full, and hear the accompanying voice-over.

These are the summary figures, so "where do you put in the raw details of each trade?", I hear you ask.

The headings for the raw data-entry boxes are just peeping above the bottom edge of the screen - they're down below. Here's an example:

As each month goes by the software will aggregate those individual summary figures into a single table so you can quickly see if things are getting better; staying around the same; or getting worse.

So this paper-trading, if done properly, is quite a serious business, made even more serious when you consider that any overall losses appearing here haven't hit your wallet. That's the importance of testing: get an idea of how good your system is before you start risking your own cash.

And of course you could backtest too by throwing historical stock prices at the spreadsheet too, to further confirm, beyond your current virtual stock exchange experiences, that your system really is worth spending real money on.

So to finish, have a look at the video of the stock trading reporting software and Hey! See the box!

Incidentally, I have no connection with the guy who wrote and sells this software, I just think he's nicely encapsulated the sorts of summary stats you could use to assess the validity of your stock trading system - and if you don't have a system, remember Phil Town's "Rule #1" book for one way to get started. Summary of Phil Town's system

KC