Rotating Image Header

Definition: Paper Trading

Paper trading, also known as “demo trading” is of utmost importance while someone is learning how to trade. Paper trading is the placing of make-believe trades over a period of time before actual money is used.

Paper trading should give a potential trader an idea of his ability to actively trade correctly. While demo trading, a trader should first try to become very familiar with the platform he is using rather than with making or losing money. After he knows the trading software well, a trader should continue his simulation in an attempt to improve his trading skills.

The way to make paper trading the most rewarding is by using a trading simulator that imitates real market conditions as much as possible with real live market prices. Even though paper trading has traditionally been carried out with stocks or futures, in the last decade various realistic and high quality currency trading platforms have hit the market.

The day trader should approach paper trading as if the money in the account is real and, for that reason, should not trade taking more risk than he normally would in real life.

Back to definitions.