Chapter 21: Paper trading
Paper trading is optional. Once you're already sourcing and placing Test-buys, it can sharpen your judgement: you track leads you didn't buy and compare what happened with what you expected.
Buying comes first. Your free trial and first weeks are for finding real deals and placing Test-buys, so you start making money (Chapter 25). Paper trading isn't a substitute for that.
Paper trading is optional extra practice that sits alongside your real buying. You write down decisions on leads you're not buying, mainly your Watch leads and a few Passes, then see what really happens. Over a month it shows whether you're being too cautious or too optimistic, without extra money at risk.
Your paper-trading kit
- About 10 to 15 minutes a day for a month.
- Your Sourcing List, with auto refresh turned on (the refresh icon: Enable Auto Refresh; it shows Disable Auto Refresh once it's on) (Chapter 11), so ArbiSource updates the prices for you.
- A simple spreadsheet or notebook, using the columns below. A ready-made file is in Downloads (
paper-trading-log.xlsx). - Keepa or the ArbiSource price graph, to look back at what happened.
Step 1: choose about 20 leads
Alongside the leads you're actually buying, pick about 20 leads you aren't buying from the Vault, Price Drops and your scans. Run the full Lead Check on each one (Chapter 19) and record your decision. Focus on:
- leads you rated Watch;
- a few you'd Pass, so you can check you aren't being too cautious;
- any Buy or Test-buy leads you couldn't buy this time (out of stock, or over budget).
Add each one to your Sourcing List and, where it helps, set an alert.
Step 2: record your starting point
For each lead, note:
| Column | What to write |
|---|---|
| Date and product | When you checked it, the product name and ASIN |
| Source and buy price | Where you'd buy it, and the price |
| Amazon price | Today's price and the 90-day average |
| Expected profit and ROI | At the average price, from ArbiSource |
| Ratings | Match, Money, Momentum and Safety: green, amber or red |
| Decision | Buy, Test-buy, Watch or Pass, and how many units you'd buy |
| Your reason | One line, in your own words |
Step 3: check in on days 7, 14 and 30
For each lead, record:
- the Amazon price and the number of offers;
- whether it's still selling (rank drops on the graph);
- whether the retailer still has it at your buy price;
- for any Buy or Test-buy leads you couldn't buy: would your units have sold? Use your share of the sales (Chapter 8) as a guide.
A quick look at the Keepa chart on day 30 shows everything that happened during the month.
Step 4: review after 30 days
Sort your leads into three groups:
- Right call. The lead behaved as you expected.
- Too optimistic. You'd have bought, but the price fell, competition jumped or it stopped selling.
- Too cautious. You passed or watched, but it would have done well.
Then look for patterns. They tell you exactly what to adjust:
- Lots of "too optimistic" on price? Be stricter about the average price, or raise your minimum profit for products with volatile prices.
- Your units wouldn't have sold in time? Be more cautious about your share of the sales, or buy smaller quantities.
- Lots of "too cautious"? Your minimums or filters may be stricter than you need. Try lowering one a little.
- A category that keeps going wrong? Leave it for now, and focus on the ones that work for you.
Write down what you'll change. Small adjustments to your minimums, filters or deal score weights (Chapter 4.3) can make a big difference.
You won't be right every time. The log shows you why leads behaved as they did, so your next decision is better informed.
Step 5: put it next to your real results
Compare your paper log with your purchase log:
- Watch leads that did well? Move similar leads up to Test-buy next time.
- Real buys that disappointed? Check whether the paper log shows the same pattern, and adjust your minimums.
- Repeat every month or so, or stop once your real results give you enough feedback. Your notes become your own sourcing playbook.
Checklist
- I'm already placing Test-buys, and I'm using this log alongside them
- I've chosen about 20 leads I'm not buying (mainly Watch and Pass) and saved them to my Sourcing List
- I've recorded my ratings, decision and reason for each
- I've checked in on days 7, 14 and 30
- I've reviewed the results and written down what I'll change