What is Paper Trading in Stock Market?

Paper trading or demo trading is a common term in the forex and stocks trading industry.

Paper trading meaning

What is paper trading?

Paper Trading is a process of practicing trading without using real money. Traders today use trading simulators (stock trading simulators, demo accounts, etc.) to trade assets without risking real money. Paper Trade’ comes from an old stock market practice of writing down buying and selling stocks on paper.

Is paper trading free?

All brokers offer paper-trading for free to customers because they want them to use the same trading software as real money traders. Later, when paper trading traders become ready for real money, trading brokers will make a profit.

Paper trade is realized as having evolved as a result of the fact that investors at the stock exchange market had a great desire to be able to engage in the practice of trading, so they would resort to the usage of paper to record their investments and track the movements of the market. The wide array of trading markets attracts an abundance of traders who are new to the world of grading. Some new traders tend to be those who are seeking long-term trades. On the other hand, some traders are seeking to engage in conducting trades that are shorter term. It is noted that all new traders share the common trait of a bit of hesitation, which is comprehensible. They also share the characteristic of being concerned about the possibility of experiencing a loss of money due to their trading decisions.

Live trading meaning

Live trading represents trading the tangible and financial assets (stocks, forex, options, bonds, commodities, etc.) using a real funded trading account on the live market. In live trading, the trader can make a real profit or actual loss, unlike demo and paper trading, where traders trade without real money.

Though the truth is that there are risks associated with all forms of trading, there are several tools that brokers offer to aid new traders in achieving improvements regarding their skills in the world of trading. One of the tools that are provided is known as paper trading. But the reality is that you may not hear this term much because it is often referred to as trading on a demo account within the online trading world.

Stock market simulators have permitted investors to practice their skills in stock trading during the past recent years. With this being the case, there is no requirement for the usage of money that is real when this trading is done online. As a result, this has empowered investors to conduct a determination concerning how well their trade would have done in a real-live market.

To gain easy practice regarding trading skills and conduct phases of backtesting about strategies to establish whether they are viable, investors can now use modern technologies to assist with these issues. Consequently, this means that investors possess a tremendous advantage to see if the strategies they apply to their trading decisions would have achieved good results during real-time.

Is paper trading free? Yes. You have a lot of trade simulators like Free TradeStation paper trading, or if you like to trade currency pairs, commodities, major stocks, you can use the free Mt4 Demo account platform for free as well.

Another benefit of stock market simulators’ usage is that they enable investors to completely embrace the brokers’ platforms’ details and nuances. This will assure that the investors will be able to conduct navigation with ease and will be able to gain a good comprehension of the manifold innovative trading orders which are present on the various platforms in the trading world today. In addition, they will be more fully exposed to the tools and features of the platforms. This will undoubtedly take the guessing out of what paper trade is.

Nowadays, when stock trading has become easier to do from your own computer, many investors do not opt for brokers and try to do trading on their own. Such newbies who are inexperienced in trading can go for paper trading to record their trading orders and their gain/loss on a paper. Investors can also try stock market simulating tools that help them learn trading skills and judge the risks that might occur in actual online trading.

Paper stock trading platforms

Paper stock trading platforms allow traders to trade stocks, compete, and train on demo accounts. For example, traders can use paper trading platforms such as Webull paper trading platform, Metatrader, etc.

Webull paper trading:

What is paper trading on Webull?

Paper trading on Webull represents competition where website members can get virtual cash and trade assets without real money. Webull offers a $300 prize every week for traders with a positive portfolio return.

Does Robinhood have paper trading?

Robinhood investment platform does not allow traders to paper trade. Instead, traders can simulate trading with other platforms such as Webull or MetaTrader.

How to open a paper trading account with TD Ameritrade using Thinkorswim?

How to switch to paper trading Thinkorswim?
Thinkorswim is an Options focused trading platform developed by former floor traders, and TD Ameritrade purchased it. If you want to switch to Thinkorswim paper trading, you need to log into the TD Ameritrade website and install the Thinkorswim platform. Then, when you enter your Thinkorswim’s username and password, you need to check the box and switch to the Paper Money option.

Does Charles Schwab have paper trading?

Charles Schwab’s investment platform does not allow traders to paper trade. Instead, traders can simulate trading with other platforms such as Webull or MetaTrader.

How to use Interactive brokers’ paper trading?

To use Interactive brokers’ paper trading, traders need to log in to Account Management. After that, traders need to Click Manage Account, go to Settings, and then the Paper Trading option.

Paper trading vs. actual trading

Paper trading advantages imply trading without risk, suitable for test investment strategy, high confidence. Still, it also has shortcomings in actual trading, such as the absence of absolute risk and brokerage miscalculation.

Advantages of paper trading

Trading without risk – In paper trading, real money is not used for trading, so there isn’t any chance of losing the money, eliminating the threat. This type of trading is also free to do (except you are using a simulator tool, not available to free).

Test investment strategy – Using paper trading, any new investor can try their investment strategies and test to see whether they will be successful in the real stock market. It is equally convenient for experienced investors trying their luck with a new approach that hasn’t been used in the real market yet.

Confidence– Paper trading gives confidence to new investors in trying to trade in the actual stock market. By practicing buying and selling multiple orders, investors can get themselves familiarised with the working of the market and understand risk factors, reducing their fear of trading.

Disadvantages of paper trading

Miscalculation of brokerage –Often, orders’ profit margin is reduced. Due to high brokerage and commission In paper trading, as this method does not involve any commission, an investor might mistake miscalculating the brokerage. But while trading in the real world, it might become costlier for an investor, especially a new one, to buy or sell the stocks.

Absence of real risk– Paper trading does not involve the use of real money, which reduces the risk of trading, and investors tend to process orders very efficiently without any fear of losing the money, due to which investors may not get an idea of a real risk that is present in the stock market world.

Fear of overconfidence – As paper trading comes with less risk in using real money, investors might become overconfident if they do well in the simulating environment or if their strategies turn out to be successful. Real market scenarios are harsh, and investors might not be ready for them, creating a problem if they face a loss anytime.

Paper Trade Simulators

Many useful paper trading simulators are available in the market that investors can use to learn the trading. Such tools are Investopedia Stock Simulator, the Warrior trading paper trading simulator, wall street survivor.

Stock Market simulators

Investing in the stock markets is risky, and a person with no experience can make massive losses due to his ignorance about the stock market or lack of skills. Hence, new traders are often told to use a Stock Market simulator to become familiar with a stock market’s features. They can practice buying and selling various stocks without taking any financial risk. Virtual stock trading or paper trading allows the investor to practice investing in the stock market. Virtual money is used to invest in a market that is similar to the real market. Though the simulator is popular among new investors, experienced investors may also use it for testing new investment strategies.

The market simulator is also used for educational purposes. Many investment strategies require expertise and technical knowledge of the stock market. Even small mistakes can cause losses to the investor. Hence these investors prefer to use the market simulator to perfect their investment strategies before investing real money. Some of these strategies involve creating different positions, leverage, short selling, and trading in derivatives. Many companies, like stock brokerage firms, offer simulators to investors like demo accounts for 14 days. In addition, some tools simulate online trading.

Stock Market simulators types

The financial market and fantasy simulators are the two main types of simulators for the stock market. The simulators of the financial markets are using entries of natural stocks and trading using virtual currency. To ensure that the data is not misused, the simulators use a stock data feed, which is delayed by at least 15 minutes. Others produce random data that is similar to actual prices. They help the person using the simulator to decide whether the strategy is right. Fantasy simulators use items that would not be generally listed on the exchange, like television shows, sports, betting systems.

Stock Market simulators technology

Most of the available stock simulators are developed using C, C++, JavaScript, ASP, PHP, and a database, usually MySQL. While a few of the simulators are open source, in other cases, the simulator includes expensive software for predicting the stock market. The simulator engines are developed after extensive research and can be customized for different applications. They are often modified to track the popularity, rank, and determine various trends in science and other fields.

Stock market games

Games related to the stock market are speculative and allow players to trade futures, stocks in a simulated or virtual environment. While many investors play these market games to gain experience, some play these games for entertainment. The players of these games may compete to predict the trends in the stock market accurately. Some of the games use actual stock-related data from major stock markets like NASDAQ. The games may also include competitions for fantasy trading. Many prediction games include stock markets. However, in some cases, the simulator could be deceptively easy, and it may create the wrong impression for a person who has no stock trading experience resulting in losses.


Paper trading is a helpful mechanism for new and experienced investors to educate themselves on the stock market’s working and testing of investment strategies. But, simultaneously, before jumping into the real world of trading, investors should practice enough and be careful of the risks involved in the real stock market.



Igor has been a trader since 2007. Currently, Igor works for several prop trading companies. He is an expert in financial niche, long-term trading, and weekly technical levels. The primary field of Igor's research is the application of machine learning in algorithmic trading. Education: Computer Engineering and Ph.D. in machine learning. Igor regularly publishes trading-related videos on the Fxigor Youtube channel. To contact Igor write on: igor@forex.in.rs

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