The term ‘paper trading’ originated from when traders on the stock market wanted to practice trading before trading with real money and would write their investments on paper and follow the market movements.
Paper trading is also sometimes called virtual trading or demo account trading and enables you to simulate a live trading environment with virtual funds before risking real money. a paper trading account helps you get used to your broker and the trading platform you are using, as well as test and refine your trading strategy. All traders should demo trade for at least 30 days before graduating to live trading.
CFI offers you the ability to trade the global financial markets with no risk using a free demo trading account. With a demo account, you get an identical trading environment to that of a real account so when you make the transition, the only difference will be using real funds.
Key takeaways:
- Opening a paper trading account with a broker lets you get familiar with the trading platform and learn how it works from a user perspective.
- Before you enter the markets for real, it is crucial that you can comfortably open, amend, and close trades when you need to.
- Knowing how to efficiently use a platform removes a lot of unwanted stress when it comes time for live trading.