1) I always tell this to people. So much of investing / trading comes down to your emotional reaction, and paper trading does not invoke these emotions.
Contrary to your #3, I actually suggest starting with a small amount they can afford to lose. Better to work out the kinks and/or find out you're not cut out for it before you bet serious money. It doesn't have the full psychological effect, but it can be a big wakeup call for people.
2) Absolutely. Grind it out. Every day you try to get a little smarter and make better decisions. Learn to love the process and don't lie to yourself. I like to rub my nose in mistakes to make sure I don't repeat them, but I also take a moment to appreciate things I did well, like getting out of a situation when I realize I don't have a handle on it, even if it means taking a loss.
4) No textbooks can prepare you for the mental anguish of watching your portfolio sink. You feel like the biggest idiot in the world, even moreso if you are underperforming the market. Of course, when you're up, you feel like a genius. Its during those times I find it wise to reflect on the not-so-good months to remind myself that I'm not invincible.
5) As Buffett says about leverage, "If you're smart, you don't need it, and if you're dumb, you got no business using it."
To add my own:
6) If you don't know what your edge is, you probably don't have one. What advantage do you have over the other market participants?
7) "If you want a good gambling life, make positive expectation bets." - Ed Thorpe, in Mathematics of Gambling
So much of the day trading dream is based around the idea that consistent gains show the strategy is working, and not just that you haven't paid to hedge for the event that's going to wipe out all those gains in a very short period...
I would also add another rule:
6) Think of your job as a trader is not to make money - it is to manage risk. If you have an edge, the money will come. But if you fail to manage risk, you will fail.
I honestly couldn't care less about credit card money losses, but I've seen too many people with assets(home, profitable website, really good job, nice cars) get reamed in bankruptcy court. Or, they lie about assets. Lie about assets, but make sure they never show up anywhere.
And just because you lied about your income on that cc form; in 99 percent of the time, it won't be mentioned in bankruptcy court. Credit card companies use your credit credit score to give you of money, and I believe they still redline(give more to certain individuals). Bankruptcy lawyers know most people lie on those cc applications. Yes, it's technically fraud, but try to prove it. They just don't. Nolo Press has a glaring error concerning income, fraud, and potential bankruptablity. It think newer editions corrected it?
If you get onto financial troubles, try to be proactive. Learn about what assets are legal to transfer. Learn about statue of limitations. Protect yourself from these bottom feeders.
(I don't want to debate anyone on the ethics of the cc industry. I just got a cc plea offering me a 29 percent offer, and if I could do it again, I would have ripped up that first cc card sent to me upon graduation, endorsed by my school.)
O.k., I am obviously not a lawyer, but have dealt with these individuals. If you think you get a funny feeling about your lawyer; walk--they are a dime a dozen. If you have nerves of steel, and are good at research it's not unheard of to do your own bankruptcy. Yes, I know the adage, just there's some people that can do some sophisticated legal work themselfs.
Most lawyers offer a free first visit. See a few of them. Take notes. The slimey ones try to scare you. The moral ones are strait shooters. Double check verything they state. Try to get a money back guarantee.
Back to you medical bankruptcy; hospitals, and doctors say they use the judicial system to get their overpriced fees only sometimes. They do go after thousands of people yearly though. They are basically lie. They get judgements, and force previous patients out of their home. Completely disgusting in my world. If I was a rich dude looking to donate money to a hospital, I would have one question, "Have you ever sued a patient for nonpayment? How many? What were the facts of the case?
If you are forced into bankruptcy, and have a house there's a homestead exemption in most states. I believe it's $125,000. It's not much. I know in Texas it's basically unlimited--which it should be nationwide! No one should be able to touch your home, especially in a medical bankruptcy.
Now if you have a house, and a bank account. String the creditors on for as long as possible. In the mean time, talk to a lawyer about getting rid of assets. You don't want hide assets, by illegial transfers, but it's complicated. Their are ways to hide that house, but it's tricky, but doable. Don't be the idiot that goes deep in collections, and transfers the home into a family members name, and then a week later file for a chapter 7. Again, talk to a lawyer if you have assets.
The whole process scared me. Be strong! Everything will work out, especially in a medical bankruptcy. I was so scared over my financial difficulties at one point, I considered committing suicide. Talking to the right lawyer, a guy who basically told the truth--really settled me down. I knew he was my guy when he said, "All my clients lie about they annual income."
(Don't take advice too seriously form Internet chat rooms, or even myself. There is still so much wrong information, even by porported lawyers. I didn't help you much, but you seem to have a straight forward bankruptcy. Don't let this ruin you life. I spent so many unneeded nights worrying. I won't even say good luck, I don't think you have a sticky bankruptcy. As to lituraure, Nolo Press is pretty good, but they too make mistakes. Learn how to do legal research. Become familiar with bankruptcy codes/procedures for your state.)
I take issue with your statement that housing should be exempted from bankruptcy. As someone who rents and doesn't own, and thus has a net worth that is more concentrated into savings/investments, why should a house be protected? I'm not protected from losing the savings that I haven't invested into a house.
In a similar vein whenever something like this comes up I write something that says don't try and do this and inevitable I get 10+ emails from people saying "Ok I understand but I still want to do it anyway."
So if you really want to try and day trade, here is my 5 points of advice
1) You haven't done anything until you trade with real money. Ever played poker with friends that wasn't for money? You always get some jerk bluffing and going all in on Ace-7 because why not, it doesn't matter.
If you want to trade you need to learn your own emotional limits. Get invested as soon as possible. Learn what kind of stress you can deal with.
2) The average successful individual algo trade looks like John Turturro charter Joey Knish in rounders. You are always grinding out a living $100 to $1000 at a time. If that isn't' appealing then stop before you start.
3) You need money to begin. It takes as much effort to trade 2000 as it does 200,000. Above a million or so things change. A minimum amount I'd use would be 50,000. If you can't set that aside to trade then don't start.I mean if you have a great year trading 5,000 and make 20% you have made $1,000. That's not worth the effort. But at say 100,000 your 20% is starting to be real money!!
Be clear to yourself that you are doing this for the money. Any other reason just gives you an easy out.
4) The most important number to look at is draw down, not sharp ratio. I see lost of people on quantopian show great backtested algos that return 200% over 5 years, but have a 70% draw down at one point.
Most people don't have the psychology to loose money. At 10% down you start to question yourself. At 20% down you get really grumpy in all aspects of your life. Most people don't have the ability to let their positions fall to 30% down. If your backtest has a draw down of more than 30% you don't have a workable algo.....period.
Sharpe ratio is great if you are an HFT firm trying to decide how to divvy up your money across 30 successful algos. You don't have 30 successful aglo's. You will be lucky to have one.
5) Don't use leverage....... you can break the other rules, this one you can't. I've seen people go bankrupt. Don't use leverage.