Week 10: Paper Trade Using Live Market Data
Paper trading applies the algorithm to current market conditions using virtual capital. It reveals problems that are invisible in a historical backtest — delayed signals, incorrect instrument selection and unrealistic fill assumptions.
Monitor during paper trading
- Signal timing, delayed or missing data
- Difference between expected and available prices
- Duplicate signals and instrument-selection errors
- Position-sizing errors
- Sudden market movements
- Internet or API disconnections
- Incorrect end-of-day exits
Maintain a journal with
- Signal time, expected entry and simulated entry
- Stop-loss, exit and reason for exit
- What the backtest expected vs what the market actually did
- Any technical issue
Discipline rule: do not change the rules during every paper-trading session. Record the issue first and review changes only after collecting enough evidence. Remember that paper trading cannot fully reproduce liquidity constraints, emotional pressure and real order execution.
Week 10 outcome
You should have a complete paper-trading record and a list of technical or strategic differences from the backtest.
This lesson is for educational purposes only. It is not investment advice, a recommendation or an assurance of returns. Trading and derivatives involve substantial risk, and backtested or paper-trading results do not guarantee future performance.
