Monday, July 17, 2006

First IB Paper Trades

Sunday night I identified 2 stocks that looked like they had a reward:risk of > 2:1 and set up the trades on my Interactive Brokers Virtual Trading (paper trade) account. They've given me 1 million dollars in the account and I don't know if I can change the amount or not. I've considered reducing it to what I'll really be trading with for the most accurate virtual experience, but have not yet found if or where I can configure the "funding" of my virtual account.

The first stock I set up for shorting dropped down just enough to fill, only to increase enough to stop me out for a small loss. No big deal, looks like it was going against me anyway, so may as well just get out.

The second looked like a decent setup but normally would not have been filled today because it didn't drop below the entry threshold. However, because I didn't know how to set the conditional activation of the stop-loss I ended up long on a stock that I wanted to short! Oops!!

This is why we practice with paper money, right? I know it's not a mistake that I'll repeat and I have since located the conditional aspect of an order. The ability to set conditions on the order is considered an advanced feature that Interactive Brokers "hides" early on to simplify the interface. Rather than just panicking and closing out the position, I decided to protect from it dropping below a certain threshold where it seemed to have found some intra-day support. Hopefully tomorrow it will inch up back to where I falsely entered the long position.

Tonight, after going through my Hotwatch list I couldn't find any trades that looked like high enough reward:risk ratios to bother so I didn't enter any new paper trades. I'll be paying attention to that second stock that I accidentally went long on to see if I can exit with only a small loss or possibly even a gain.

4 comments:

Trader Taocode said...

Update: I squeezed out a profit of 1.8% on my accidental long position. I managed to close the position earlier today really near it's highest point of the day. Definitely luck, but I'll take it. This effectively neutralized the 1.5% loss I took on the other trade that got the false start. Actually, it worked out exactly dollar-for-dollar break-even. My account is set back only the cost of the trades: $4.

Anonymous said...

Mark you should use www.optionsexpress.com to paper trade. It is also a great brokerage account to have.

Trader Taocode said...

I've signed up for, and used OptionsXpress already. My motivation for using Interactive Brokers is two-fold: 1) they are very cheap, so cheap that you can almost ignore the commisions in your bottom line. This has great appeal to me, as I do plan to be very active. 2) Both my mentor and my coach use Interactive Brokers. Since I'm learning from them, it seems like a no-brainer to learn and use Interactive Brokers.

I'm posting a much longer entry about this, which I've promised for some time now. Take a look for that post.

Anonymous said...

Note that it is www.optionsxpress.com. They had to drop the "e" to get by Net Nanny programs.