INVESTING

The Perks of Paper Trading

Are you curious about investing but risking your hard-earned money in an organization gives you anxiety? Consider paper trading to earn your sea legs! This no-risk strategy offers an opportunity for you to test out investing situations while becoming educated in the ways of the market. Let’s discover how paper trading helps build your knowledge and confidence as an investor.  

Paper Trading Basics 

Paper trading is the act of simulating trading situations, allowing aspiring investors to experiment with buying and selling stocks without using real money. This strategy was once tracked on paper but has since been replaced with electronic stock market simulators. Just like paper traders of the past, users can experiment with buying and selling stocks without risk. They can keep track of their hypothetical trading decisions, portfolios, and profits or losses.  

To get started, testers create an account and choose an amount of imaginary money to conduct their trial. From there, they select how and with whom they’d like to invest. For the best experience, look for a simulator that can support several options including short selling, limit and stop orders, equity trades, and options trades. It should also mimic most corporate actions including splits, mergers, and dividends to give you a realistic feel.  

Why Try It 

There are a few advantages to experimenting with paper trading or using stock market simulators. Sure, you won’t earn money, but what you’ll likely gain is knowledge and confidence from your decisions. Novice-level investors usually become more proficient with reading stock tables, gauging market volatility, testing different trading strategies, and more! Additional benefits include: 

• Access to investing learning resources: Some platforms offer demos, tutorials, educational articles, and online support communities.  
• Room to make mistakes: Using simulators allows you to make good and bad decisions when building your portfolio or making trades. This can help you learn without suffering the consequences so you can focus on developing your strategy rather than fixating on your mistakes.  
• Opportunities to test before you invest: Even the more advanced investor can benefit from simulators! Anyone can try their hand with a new strategy or investing type to further their endeavors.  
• Learning to ride the rollercoaster: Investing brings about many emotions as the market and your securities fluctuate, so why not learn how to navigate them when there’s nothing at stake? Although this doesn’t offer a true replication, it can be a smart way to ensure you’ve developed healthy coping strategies ahead of getting started in the investing game.  

After testing out your investment plans, consider taking the plunge into the market! With additional knowledge and experience, navigating this new money-making world won’t seem as intimidating as it once was. Trust the process, keep your emotions in check, and turn to the experts and resources when in doubt. After all, nothing ventured means nothing gained! 

Sources:

https://www.nerdwallet.com/article/investing/virtual-trading-stock-market-simulators

https://www.investopedia.com/articles/stocks/08/stock-simulator.asp#:~:text=Stock%20market%20simulators%20are%20online,which%20to%20make%20simulated%20investments.

https://www.investopedia.com/terms/p/papertrade.asp