Paper trading and portfolios: why returns have to be measured honestly

A portfolio in TradeAlmanac is built from transactions. Positions, cash balance and the history of value are projections recalculated from those transactions. That was done for one reason: any figure can be explained by showing which operations produced it.

Why not "enter your current positions"

Because then returns cannot be calculated. A position says what you own now; it does not say at what price and when you bought it, or how much money you added along the way.

Time-weighted return: performance stripped of your contributions

If you added money just before a rally, the simple difference between the closing and opening balance credits you with skill you did not exercise. A time-weighted return answers the question about decision quality rather than wallet size.

The paper-trading account

The paper account fills orders from stored quotes and never sends a real instruction to a broker. An order cannot fill at a price that did not yet exist when it was placed — that is what makes the result meaningful.

What paper trading does not model

It does not model your emotions. A drawdown on a paper account does not wake you at night, and that is the one difference that genuinely matters.