Paper Trading: Practice and Learn Investing Without Risk

A paper trade is simply a simulated trade that allows you to buy and sell stocks (without risking money). The reason it’s called a “paper trade” is that back in the day before computers, aspiring investors would write their trades out on paper to practice before risking it in the real stock market.

In other words, paper trades let you trade with “fake” money to practice buying and selling securities. Usually (if you pick a good trading software), the stock prices will be updated in real-time, so you’ll get as close of an experience to actual stock market trading as possible.

Paper trading provides a great way to gain exposure to the stock market, but as with everything, there are advantages and disadvantages.

The biggest pro of paper trading is that you risk zero money! If you wanted to buy a thousand shares of Apple in real life, you’d need to spend over $100,000 (as of now)!!! You can try it out with practice trading to see what happens and risk no money.

Risk Zero Money

Test Out New Trading Strategies

Whatever the case, you can test out your strategy in a paper trading environment before going out and risking anything. That will build your confidence in your trading strategies and let you know whether they have a shot at working. 

This way, when you put money on the line, you’ll be a pro with the software. Knowing what you’re doing will provide you with a considerable advantage come time for you to start investing.

Get Familiar with Your Trading Platform

A lot of new investors will read about paper trading and laugh at it. “Why bother trading if you’re not going to make any money?” That is the wrong approach.

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