What is paper trading? If you have never heard about it before, it is time to change the situation. This instrument will come in handy for you, regardless of your trading record. So, read on to learn about this tool and platforms offering it.
The first thing we must do is to determine what paper trading is. This term states for simulated trading via a demo account without depositing or risking money. As a rule, this instrument is offered for beginners so that they can apply their theoretical knowledge in practice without risks. As for advanced traders, they can use this tool for polishing their routine strategies or testing new ones, as well as checking and evaluating new brokers before making actual deposits. In fact, paper trading accounts are the same as demo accounts.
7 reasons to try a paper trading app:
· you can learn how to effectively invest in diversified assets in practice without risking your money;
· such risk-free trading will add to your confidence as a trader;
· you can focus on improving and developing your skills without unnecessary stress as there is no real money involved;
· it is free of charge;
· anyone can try it without any conditions or requirements;
· brokers often offer extra bonuses or discounts to those users of demo accounts who want to become their clients and try real trading;
· it is a great method to test the functionality of a broker service chosen;
· you can use paper trading when you want to try new strategies, schemes, or tools.
Yet, to be objective, we should also mention certain limitations related to such virtual investing:
· you will trade in conditions close, but not identical to real ones (there can be certain delays in price movements and other minor differences);
· there are no slippage risks like in real trading;
· commissions and spreads are not reflected;
· it is not as emotional as investing for real, so you cannot say for sure whether you will manage to stay equally calm and patient when you put actual money at risk;
· you will not receive any real profits (that may be rather disappointing).
Now, let us discuss how to choose an application for paper trading. What are the key criteria to pay attention to? We must mention the virtual limit, trial period duration, available markets. Besides, it is better to choose the broker service on which you plan to open a real account afterward if everything goes smoothly. Thus, take into consideration the fees and terms for real accounts as well. We recommend you start your search from Webull, eOption, eToro, Interactive Brokers, or TD Ameritrade.
In the end, we want to highlight that paper trading is a must-use tool for every trader. Do not haste to risk real money, instead, always start from such a free training course.