It would be irresponsible to say that investing is an easy or risk-free way of making money. The only risk-free way of making money is by working a job. All investing carries some degree of risk, and it’s possible to miscalculate or make a bad prediction and lose a lot of money. Investing is a skill, and those who treat it as a skill will get the results they want over time, through learning and a willingness to make repeated, smart risks.

How do you take the first step to become a skilled investor when you haven’t risked a single dollar on the market yet? Where do you begin? How do you get over the anxiety of potentially making a mistake? For many, the answer to those questions is paper trading, a risk-free way to practice at investing. But whether paper trading is the optimal way to get started will depend on a few factors.


  • Paper trading is a practice form of investing.
  • Traders use paper trading to buy and sell securities in a virtual environment with no real money or ownership involved.
  • Some online broker sites and apps offer demo accounts for paper trading.
  • Paper trading can help teach beginner investors how a platform works and help them learn the basics.
  • Paper trading can be used by experienced investors to test new ideas at no risk.

What Is Paper Trading?

Paper trading is a simulated form of investing that doesn’t risk real money. It involves trading stocks through a virtual method, such as a stock market simulator app. You could liken paper trading to playing a video game about being an investor. The rules are identical to regular trading, but all the money and assets involved are just part of a practice scenario.

Since there is no way to lose money on paper trading, and the funds invested are all simulated, it can be valuable for those new to investing. These fake stock market apps or virtual trading sites can help a beginner get experience and a feel for the process. A few sites and apps used for real trading also offer demo accounts for paper trading, so you could practice trading stocks and then transition into the real thing from the same service.

Paper Trading: the Pros

The biggest appeal of paper trading, of course, is that it’s risk-free. A beginner investor could experiment with different stocks and make mistakes that lead to a loss, but none of those losses are real. As long as that loss is taken as a learning experience, the paper trading works as a kind of visual training, helping the person make better choices in the future. You’ll be able to learn about different orders, form a chart layout, create a stock watch list, and get used to operating an investment website or app in general.

Paper trading can be useful for hands-on learners. Investments take a bit of study and research to understand at first. For someone new to investing who has trouble figuring out the theories, terms, and strategies of trading stocks through videos, books, or other teaching materials, paper trading might be the last piece of the puzzle. Some in-the-field experience studying, buying, watching, and selling stocks can inspire confidence and help a new trader feel like they can do it after all.

The experience put into paper trading can be the first critical step in getting familiar with investments and building a routine around them. Many experienced traders started this way and used paper trading to learn what kind of stocks, strategies, and routines they liked the best.

Paper Trading: the Cons

The same aspect of paper trading that makes it appealing could also be its biggest problem. Because it offers no risk, it might be harder to emotionally reflect on any mistakes or successes and learn from them. When you feel the sting of a dropped stock or a missed opportunity to sell, you’re more likely to think back on those experiences when making future buying or selling decisions. There may be a disconnect in what you learn through paper trading versus how you behave with real money.

Another potential issue that some traders have with paper trading, especially after getting some experience in the real market, is that it’s hard to feel motivated when there’s nothing to be won from the right choices. With no skin in the game and no potential earnings to get excited about, it might be harder to think a few steps ahead and chase down good opportunities. Sometimes the best investing ideas come from the pressure of knowing that real wealth is on the line.

When Should You Use Paper Trading?

For people who know that investing is a good idea but are uncomfortable taking that first step and risking any real money, paper trading is a great introduction to the mechanics and theory of investing. Just keep in mind that it’s only an introduction. Once you’ve grown comfortable with how the system works, it’s probably time to take the next step and start investing for real.

Nothing forces you to go from virtual, demo investing to wagering thousands of dollars on the real market. Start at a scale that’s comfortable to you, with a similar strategy or focus to whatever worked for you in paper trading if you wish.

How to Make Paper Trading Work For You

When paper trading, try to behave as if there were real money involved. Try to make the experience as close to how you would act on the real stock market. Later, after growing familiar with the system, it will be easier to transition into real transactions on a similar platform. Record the information and take down key insights as you go, keeping a clear track of what’s working and what isn’t.

Another smart way to use paper trading is by testing a brand-new strategy that you aren’t familiar with. If you have less experience with a certain type of stock, such as penny stocks, you could operate your normal investments while also experimenting with penny stocks through paper trading. After getting some insights, you could carry penny stock strategies over to your real investment portfolio if you felt confident.

Best Virtual Trading Software

There are a few stock market apps and websites with a demo mode for practicing. These are generally a good idea because when you feel ready to start doing real transactions, you’ll be working within the same platform. Still, there are plenty of apps designed entirely for paper trading, and some may suit your needs. Here is a rundown of a few popular, well-rated choices:

  • TD Ameritrade offers a free virtual trader called Thinkorswin. You can access their platform simply by registering with an email address, with no obligation to pay for their standard broker service. The system has plenty of tools, not the least of which being scanners to find viable stocks under different search parameters.
  • TradeStation is a pricey but powerful platform for those who want to take their investing seriously. Made for active investors, the system has plenty of powerful, customizable tools to optimize the user’s experience. Traders can sign up for a paper trading account to try TradeStation for free.
  • Warrior Trading charges a small monthly fee for the use of its virtual stock trading simulator, but for good reason. Crafted with collaboration by NASDAQ and NYSE, Warrior Trading’s paper trading platform is as close to reality as possible and operates on the real-time conditions of the market.
  • Stock Trainer offers a paper trading app that is extremely easy to try. Just sign up through a social media account and you’re in. Updates are frequent and the platform includes plenty of chart tools to make informed choices. Keep in mind that Stock Trainer is for Android phones only.
  • Wall Street Survivor is more of an investing-inspired game than a realistic paper trading platform, but the premise is the same and it could be more engaging and less intimidating for a total novice. Every investor starts with 100,000 virtual dollars and competes in a league to earn the most money back. The system, while simple, still introduces important core concepts like small-cap investing or options.

The Long and Short of Paper Trading

The experience offered by paper trading can inform your future decisions when real money is on the line. However, some systems are closer to reality than others, and better systems tend to cost money. Beyond that, anyone getting started through paper trading will still have to take the leap into real transactions. Regardless, for anyone completely new to investing, or looking to experiment with a new strategy at zero risk, paper trading is a useful tool.

If you want to conquer your fears and hangups about investing and start growing your wealth, you need expert knowledge delivered in plain English. Get Jeff Bishop’s $49 Option Profit Accelerator eBook for free to expand your trading possibilities and insights. Will you be the next success story on Raging Bull? As long as you keep trying and don’t stop learning, the answer could be yes.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of and the Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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