Paper trading means trading without investing real money. In this, you buy and sell shares just like in the real stock market, but only on paper or on a virtual platform.
This way you can practice trading without fear of loss.
In simple words, paper trading = the practice of trading without money.
Why is paper trading important?
If you are just starting in trading or want to practice a new idea, paper trading is a great way to learn without any risk..
- From paper trading:
- You learn to understand the market.
- You can learn from your mistakes without losing money.
- Your confidence increases.
- You learn to make your own decisions.
How to do paper trading?
Paper trading is very easy and with multiple ways mentioned below:
1. In a diary or notebook
- The easiest way is – by writing it down in a copy or diary.
- Note down the name, purchase price, and time of the stock you want to buy.
- Whenever you want to sell, note it down and then calculate the profit or loss.
2. Use an online platform
Nowadays, many apps and websites provide the facility of paper trading, Create an account, get virtual money, and you can trade virtually just like in the real market, here Some popular platforms:
- TradingView
- MoneyControl
- Investopedia Simulator
- Sensibull (for options)
Advantages of Paper Trading
Now let’s know what are the advantages of paper trading:
1. Learning without money– You don’t have to invest any money. So there is no risk.
2. Understanding the market– You learn how stocks move, when to buy and when to sell.
3. Learning from your mistakes– You won’t lose money if you make the wrong decisions, but you can learn from your mistakes.
4. Create and test your strategy– You can create your trading strategy and see if it’s working or not.
5. Increase your confidence– When you consistently make the right decisions, your confidence also increases.
Things to keep in mind when doing paper trading
Here are some things to keep in mind when doing paper trading:
- Take it as seriously as real trading.
- Don’t just “let’s try it”, but make decisions after careful thought.
- Keep a record of every buy and sell you make.
- Act logically, not emotionally.
- Create a trading journal and write down every day what you did and why.
How long should you do paper trading?
Many people have this question in their minds: “How many days should you do paper trading, The correct answer is:
- Until you start getting consistently good results.
- Until your trading strategy starts working properly.
- Until you learn to control your emotions.
- Some experts say that paper trading is necessary for at least 2-3 months.
What are the mistakes made in paper trading?
Some common mistakes people make while paper trading are:
- Not taking it seriously.
- Trading on a whim
- Buying stocks without logic
- Not keeping records
- Getting bored quickly
- If you avoid these mistakes, you will benefit greatly.
The journey beyond paper trading
Once you become proficient in paper trading, you can start real trading with small amounts, Remember:
- Invest a small amount in the beginning.
- Invest only the amount you can afford to lose.
- Gradually increase the amount with experience.
Some Important Tips
- Set aside 1-2 hours daily for paper trading.
- Write down the reason behind each trade – why you bought or sold.
- Review your trading journal every week.
- Focus on stocks from different sectors (like IT, banking).
- Keep learning, understand new patterns and charts.
