Setting Up a Paper Trading Account

Question:
I cannot trade with "real money" as yet; however, how do I go about setting up a paper trade account?

Answer:
You can paper trade various ways and it really does not require that you have anything more specialized than a notebook to track your trades and access to charts.

Begin by funding your paper trading account with the amount of money you think you will really begin with, whether it is $2000 or $20,000. I would suggest that you begin with no less than $5000 and $10,000 is even better.

Next you need to decide on which markets you are going to trade. The more money you have in your account, the more markets will be available to you. If you are trading with a $5000 account there is no point in becoming familiar with a market like Crude Oil that has a margin of $3000 per contract!

Assuming that you are a smaller trader, you will be most interested in the lower margin markets like the grains, some of the meats, maybe a metal and a currency or two. I would suggest you limit your scope to about 6 - 8 markets, as these will be enough to track on a daily basis.

Even real money traders rarely follow more than 8 markets...it just becomes too cumbersome, as I'm sure you will find when you've got more than one paper trade going at a time.

If you don't know which markets to choose from, maybe I could make a couple of suggestions:

* Corn, or wheat - these are good markets for traders of all levels, but especially the beginner. The margin is not too high and the markets normally act predictably and trend well. Corn and wheat have a tendency to move together (but not always), so watching both can be redundant.

* Cocoa - a good market to make money in as a small move can add up to good profits. Also can be a good market to lose money in for the same reason. I don't mind cocoa, although I know people who have sworn it off. This is the time to find out if it is for you...when it doesn't cost you real money.

* Sugar