30 Dec

How is profit calculated?

Profit is calculated slightly different depending on the commodity. It’s really one of the biggest reasons that makes paper trading on papertrademe.com so enjoyable. We take the monotony out of calculating your profit or loss.

Here’s an example on how to calculate the profit or loss of Corn.

Formula

Ticks * Tick value * number of contracts.

Let’s say you entered a long contract of March corn at the trading price of 400.25 and few days later you exited that contract at 401.25. We know that one tick is 0.25 and it each tick is worth $12.50 in profit or loss. Therefore, the total profit for this trade would be $50.

4 ticks X $12.50 *1 contract = $50

There are tools out there to make these calculations a bit easier, like this one here.

But still, an even easier way would be to paper trade with papertrademe.com. We do all the calculations for you AND keep track of your trades.

30 Dec

What is a “Market Order”?

A market order is a long (buy) or short (sell) order to be executed immediately at current market prices. For the purposes of papertrademe.com, we assume that the market is fluid and will therefore be filled immediately at the current price.

30 Dec

What is a “Stop Order”?

A stop order, sometimes called a stop-loss order, is an order to go long (buy) or go short (sell) one or more contracts once the price of the stock reaches a specific price. When the market moves to the price you have specified, the stop order becomes a market order.

Buy (Long) Stop orders must be placed above the current price. Please consider using a Limit order or a Market order.

Sell (Short) Stop orders must be placed below the current price.

The two main ways to use a stop order are:

To stop loss
Let’s assume you are in a contract of Wheat. You got in long at 405.00 and it is currently still at 405.00. You can place a sell stop order at 403.00, which would prevent losses beyond $100. This is great for mitigating risk.

To secure profit
Again, let’s assume you are in a contract of Wheat. You got in long at 405.00 and it has gone up to 408.50 for a profit of $175. You can secure some of your profit by placing a sell stop at 407.00, thus *locking in a profit of $100 if the market turns against you. As the price of Wheat continues to go up, you can continue moving your stop up so that you lock in more and more profit.

*Note: In a real life situation, the stop price you specify may actually get filled at a lower price depending on fluidity and other market factors. For the purposes of papertrademe.com, orders will always be filled at the specified price once the market touches or goes through the price.

29 Dec

Why is the status of my open trade showing “Expiring” or “Expired”?

All futures contracts expire. Each commodity has a specific, predetermined time that its contracts will expire. This is also true on papertrademe.com. 14 days before a futures contract that you are in is set to expire, the status will change to “Expiring”. And then on the day of expiration it will show “Expired”.

Unless you are planning on taking delivery of the commodity (very few want to do this), you should get out of the trade 8-14 days before the expiration date. (Expiration dates for different commodities vary.) If you want to continue trading that specific commodity, however, then you should “rollover” the contract to the next available trading month. Rolling over a contract is simply exiting the expiring month’s contract and entering a new contract in a further out month.

29 Dec

Can you give advice on which commodities to enter?

Yes! Paper trade! That’s why we built this site. So you can know which commodity to enter. But if you’re asking if we can give advice on trading a specific commodity, then no, we can’t. We’re not brokerage and we don’t intend to be.

That being said, if you do find a guru or broker that gives you advice, we highly recommend that you paper trade his or her advice. It’s ok to take advice, but you still need to be careful. Click here to read more about our philosophy on brokers and gurus.