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Paper Trading...do you really think that it's helpful?

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Learning to trade rolling stock can be done safely without risking money by "paper trading." The most convenient way to do this is with a spreadsheet system with column headings for the symbol, date bought, price, shares, Dollars, current price, net value, date sold, price, total, net $, percent gain/loss, days held and Annualized %.

You can set up the columns to compute net value from the price and number of shares, the total from the selling price times the number of shares, the percent gain/loss from the price sold minus the price paid, times 100, over the price paid. The annualized return is equal to the percentage return times 365 divided by the days held.

I recommend E*Trade for tracking and trading stocks even if you aren't an account hold'en, cash sling'en member, you can still utilize their research tools, set up a portfolio, etc. free of charge. The site has ready access to corporate profiles, "research," which is the product of what professional analysts say about the stock, and current news releases, stories from business publications and a "msg," section for user inputs, which are often rumors.

When you decide to buy a stock be sure to record the "ask" price as that is what you would pay and when you track and sell the stock use the "bid" price as that is what it is worth and what you would receive. The difference between these prices, usually a small fraction, is what the market maker, or specialist, who carries the stock, receives for their trouble and risk.

You should paper trade for several months until you develop an intuition and feel for the stocks. In any case you have to decide when it's time to put some real money into your trading. I recommend the electronic brokerages as they are so fast and inexpensive, often filling orders in seconds and for $20, or less, up to 5,000 shares. I see no great difference between them. On busy days, all will be slow to respond. There are many online brokerages, but you may want to check out the Usenet groups to see who is complaining about whom before you pick one over the other.

Generally, you will need at least $10,000 in play in order to diversify for safety and trade in large enough quantities to reduce commissions to insignificance. Paper trading will teach you how to trade and that the best laid plans can fail. You will have losses. The name of the game is picking the best stocks in the best situations and buying into them at the right time. Paper trading will sharpen your skills, save your money and make you a stronger trader.

Last but not least, take advantage of E*Trade's game. Again it's a free service and terrific learning tool, not to mention tremendous fun.

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