What is Paper Trading? Best Paper Trading Platform for Beginners

Amazing Facts about Paper Trading Platform

Paper Trading, interchangeably called Virtual Trading, is a simulated software application platform to give you a touch and feel the experience of share market trading. By using the simulation students, beginners, and budding investors learn and practice share market trading.

One important factor involved in Paper Trading is that there is no real money involved in the entire process.

Hence Paper Trading is characterized by risk-free no loss in share market trading. 

Transactions are done by using virtual money which is credited to your account when you register with a Paper Trading app in India.

Although the money is not real, however, the data is that will be used in the simulated platform is real and derived from the real stock market data.

What is paper trading?

A paper trade is simulated trading that helps budding investors and beginners to learn and practice trading securities without putting your own money at stake.

Paper trading usually involves a stock market simulator that gives a feeling as if you are trading on an actual stock market.

How to Paper Trade Stocks & How to Invest Profitably

  • Decide a sum of money that you want to invest and put it down on a piece of paper
  • Select the stocks of your choice and list it down
  • Put down the current prices of those stocks next to the stock names
  • Divide the sum of money that you intend to invest by the number of stocks to derive the amount per stock to be allocated
  • Subtract Rs.20 brokerage or transaction fee from that figure for each stock

How long should you do paper trade?

Although there are different opinions on how long a beginner should stick with paper trading, the answer is 1 or 2 years. For beginners, paper trading should last for any longer than 4 weeks.

Benefits of Paper trading

The introduction of simulated software for stock trading has increased the popularity of paper trading in India. There are online brokers who offer free paper trading accounts.

No commitment of real money to be invested

You can do paper trading to get an estimate of your investments without committing the actual money. 

Test New Investment Strategy

By not doing the investment in the real share market, one can experiment with new strategies and plan on your investments. However, to gauge your investment profits and losses, you should follow the real trade practices.

The share market paper trade investor should consider the same standard operating procedure as he would follow in the real market.

Although you are not using a live account, your investment strategies to survive the real share market dynamics should follow the real trade practices.

A paper investor should acknowledge the same risk-return consequences that he would expect while transacting live.

Investment constraints and the trading horizon would be the same as a live account trading.

Paper Trading

Paper trading practices and features

  • Paper trading is simulated trading that enables budding investors to learn the trade and practice trading in securities
  • Leveraging paper trading you can test investment strategies and plan prior to applying it on a live account
  • Many brokers offer paper trade accounts online
  • Paper trades enables budding investors and beginners on how to navigate the simulated app/tool to make trades
  • You are not present in real market conditions

Paper Trading vis-à-vis Live Accounts

Paper Trading is no less than real share trading. Before Paper Trading you should have knowledge of basic share market trading. Paper trading may make the trading look very easy. 

It may also offer a sense of camouflaged security and distorted and unreal investment yield.

This is because unlike the real market, paper trading does not confirm the extent of the actual risk of losing real money. 

Paper trading involves basic investment strategies like buying low and selling high. This would not be the real case when dealing with live accounts. Paper Trading may give a false impression of achieving this quite easily.

Psychology behind Paper trading

Professional Investors and traders may be driven by different emotions and judgments while operating on the real market.

Since the stake of losing real money, in reality, is very high, the decisions made by them may look irrational during their dealing in shares. 

Real World vis-à-vis Paper Trade

As discussed earlier, the simulator allows you to trade in without risking your real money.

Paper trading offers you an option to try various planning and investment strategies without worrying about losing your own real money to give you freedom. This freedom is hard to get in the real world of share marketing.

Paper Trading Simulator

Basic Strategy followed in the market simulator.

  • Set aside the total sum of investment that you want to commit at the outset
  • Pin your stocks and create a watch list to observe the performance
  • Follow Other professional hardened and successful Investors and Traders
  • Mimic their Trades and strategies
  • Practice Game repeatedly to soak in successful strategies  as much as you can using Simulations

Online websites where you can practice Paper Trading

There are many online brokers to offer options to practice Paper Trading through simulation games. Such brokers are Scottrade, Fidelity, and TD Ameritrade among others. 

These are the online places where you can measure the power of your newly derived investment strategies to see the outcome before applying it in the real stock trading market.

Best Trading Brokers for beginners share trading in India

Best Paper Trading Site

  • TD Ameritrade thinkorswim’s paper Money, visit TD Ameritrade. Before you plunge into real share market using live accounts, you might want to have a look at the TD Ameritrade’s thinkorswim’s platform
  • TradeStation is another online option for practice Paper Trading

Can you paper trade options?

Paper trading options allow seasoned professional investors and traders to trade risk-free transactions in a simulated environment to evaluate a derived strategy. 

A paper trading account can be an excellent practice tool for developing your own trading strategy and confirm it with experienced investors by using simulated apps.

What is a paper portfolio?

Paper Portfolio is a portfolio whose investments are transacted at benchmark prices. It is developed on the assumption that trades would involve no real money and risk-free. 

Direct and indirect costs (transaction costs, slippage, bid-ask spread, liquidity impact, opportunity costs, and market trends) do not exist in the simulated environment.

How to go about simulated Paper Trading online?

First, you will have simulated money. You can choose the kind of transaction like buy/sell shares. 

Watch the movement of prices of shares of your choice in a simulated environment and decide a buying or selling point. 

You can decide to set stop loss, limit, and stop order (below the current price), take profit, and issue orders (place orders).

How to better your success rate on live accounts

As a beginner and a novice in share market trading, you are required to learn the share market basics by using the basic simulation paper trading software available on the internet. 

A good place to study paper trading and simulated share market strategies is Zerodha Varsity

Apart from this, you can follow the experienced traders on twitter or telegram who shares the trading ideas instantly. You can shorten your learning curve by following the right people and the right strategies. 

More hard work you put initially, better the results that you can expect in a real-time environment. Do not shun away from putting long hours of practice at the beginning.

 You do not have to take every strategy they are suggesting but every strategy calls for a good practice homework and case study to delve into.

Should You Paper Trade?

If you are a new investor, you have every reason in the world to participate in practice trading before committing cash for making real investments. 

Years ago, before every investor-owned personal computer and online trading software, you needed a broker to do your bidding for you on the stock exchange floor. 

Using a personal stockbroker had many downsides. Brokers are typically characterized by high fees and hidden charges. They want to work with clients who had large sums of money to invest. 

However, personal brokers are highly skilled investors and can wisely advise their clients on which investments they should procure. 

Brokers make their ultimate goal to increase the value of their clients’ portfolios, meaning you mitigate your risk by using the expertise of a personal broker.

Anyone with the slightest amount of knowledge regarding the stock market can go online and start making investments instantly. 

Many of these new investors have no idea that the stock market is inherently volatile and the risk for large monetary losses is high if you do not know what you’re doing. 

Unfortunately, many new investors have lost a good portion of their life’s savings by making uninformed and hasty investment decisions. 

All trading experts recommend that those who want to begin trading first learn as much as they can about the stock market prior to putting in a single dollar.

You can learn about trading through reading books and reputable websites, and the experts say that a great way to get real-world experience without the risk is through paper trading.

How to Paper Trade?

You can participate in online paper-trading option or some online trading software suites that offer the tool. 

Two of the best-rated trading software applications in India, Moneybhai and paper trading nse, offer paper trading, accurately termed as virtual trading.

When you are ready, you can also use these top-rated applications to make real investments.

Prospect and Future of Paper Trading 

True paper trading before the internet age was a cumbersome process. Investors had to practice paper trading in groups.

They form groups with others to practice trading papers and actually exchange real, physical papers. 

This prevented paper trading from gaining popularity among investors. However, as the years pressed on, the stock market evolved into an almost entirely digital platform, which meant investors could simply trade virtual money over the internet. 

Hence paper Trading is replaced by a more viable option, i.e., Virtual trading. Now there is no paper involved, and budding investors can practice trading right from their own home using a simulated virtual trading app. 

Simulated virtual trading app modern-day paper trading has become a very popular educational tool. Many educational institutes conducting finance courses use paper-trading software. 

This fun way of learning is popular among students to learn the investing basics.

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Paper Trading Reviews Conclusion

Paper trading often termed as virtual trading, is a way to practice stock trading in a simulated controlled environment for educational purposes and beginners. Paper trading is a very popular method to practice trading before the advent of personal computers that became mainstream nowadays.

Newbie investors would trade using fake money, or paper as if it were real. Investors resorted to this to learn how to and what to expect from a new strategize investment technique. 

This was done in the simulated stock market environment without making a real financial commitment.

By practicing trades with paper, investors neither did risk, they stand to gain any real profit until they grew confident in their investing abilities.

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Paper Trading FAQs  

Q1. What is Paper trading software?

Ans: Paper Trading, interchangeably called Virtual Trading, is a simulated software application platform to give you a touch and feel the experience of share market trading. This is done primarily using paper and involves no real money.

Q2. What is a paper portfolio?

Ans: Paper Portfolio is a portfolio whose investments are transacted at benchmark prices. It is developed on the assumption that trades would involve no real money and risk-free. It does not cost anything such as direct and indirect costs (transaction costs, slippage, bid-ask spread, liquidity impact, opportunity costs, and market trends) do not exist in the simulated environment.

Q3. How to Paper Trade?

Ans: You can participate in online paper-trading option or some online trading software suites that offer the tool. Paper Trading is accurately termed as virtual trading. When you are ready, you can also use these top-rated applications to make real investments.

Q4. Does the Paper Trading platform provide online Applications?

Ans: Two of the best-rated trading software applications in India, Moneybhai and paper trading nse, offer paper trading, accurately termed as virtual trading. When you are ready, you can also use these top-rated applications to make real investments.

Q5. How long should you do paper trade?

Ans. Although there are different opinions on how long a beginner should stick with paper trading, the answer is 1 or 2 years. For beginners, paper trading should last for any longer than 4 weeks.

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