Paper Trading: The Ultimate Guide for Beginners

5/16/2025, 7:37:10 AM

Paper Trading: The Ultimate Guide for Beginners

Paper trading is the practice of trading using virtual money in a simulated environment. A basic explanation is using paper, which has no value for doing your transactions, instead of real money. Therefore, when you use paper, you are not exposed to any risk of losing.

However, you also do not make any real profit. Still, it is a good way for beginners to get familiar with the futures market before using real money. It is also a great way to gain the experience and skills you need to start a career in trading.

Difference Between Paper Trading and Real Trading

Paper trading and real trading are different in the following ways:

Paper trading involves the use of virtual money to take part in market movements. Therefore, there is no risk on your part and no monetary reward. On the other hand, real trading involves actual money. Therefore, in this case, there is the risk of losing and the chance of profiting.
Paper trading is used for practicing and learning. With virtual money, traders can get familiar with how the market moves. This is also a time to practice new strategies to see whether they are profitable. Meanwhile, real trading is for consistently growing money. Therefore, it can be a great source of income.
Real trading is emotionally draining because it involves real risks and rewards. Therefore, traders experience a full range of emotions, including greed and fear. On the other hand, paper trading does not involve any risk or reward. Therefore, traders in this case are calmer but do not get to experience the emotional ups and downs of real trading.
There is no pressure to perform while paper trading. Because it is about learning and practicing, you might not feel a constant need to profit. Therefore, it is easier to accept that losing is a part of the game. Meanwhile, with real trading, there is always pressure to perform. This could be as simple as making profits daily or monthly. This pressure can derail performance.

Benefits of Paper Trading

Most professional traders advise beginners to start with paper trading because it has several benefits.

Allows Beginners to Get Familiar With the Markets

If you are a beginner, it can be daunting to learn everything about trading the futures market and jump right in. However, paper trading gives you a smoother transition. It allows you to familiarize yourself with trading. This includes the platform, using tools, and placing orders. This time to practice will make it easier to transition to real trading.

Good for Testing and Developing Strategies

There is no better way to develop and test strategies than with paper trading. When you want to use a new or improved strategy for the first time, you can easily paper trade it first to see how it performs. Here, there is no risk of losing real money. If it works well, you can then apply it in the real markets. However, if not, you can keep tweaking it and testing it with paper trading.

Builds Trading Confidence

Trading with virtual money allows traders to build confidence in their strategy. Before you start trading, you must have a strategy. Using it in a simulated account will give you time to gain confidence that it will perform in the long run. This will ensure that when you apply it to the real markets, you will maintain the same confidence.

Helps Build Discipline

Discipline is a big part of successful trading. Discipline will ensure that you follow all the rules of your strategy before entering a position. However, it can take months or even years to develop such discipline. Before you get to this level, it will be hard to stick to your trading plan. Therefore, your performance might be poor. Therefore, instead of risking real money when you still can’t be disciplined, paper trade. This will give you the time and space to build discipline.

Step-By-Step Guide to Start Paper Trading

The guide below will show you how to start paper trading.

Choose a Platform With a Demo Account

The first step is to choose a platform with a demo account. Nowadays, most platforms realize the importance of a demo account. However, you must consider other factors before picking the platform. For paper trading, it is better to work with a platform you are ready to use for real trading. Therefore, ensure that it suits your trading style and preferences. This way, you can easily transition from paper to real. Some platforms that offer futures trading include TradingView and NinjaTrader.

Register for a Demo Account

After choosing a platform, head to their website and register for a demo account. On registering, you will receive the credentials that will allow you to log in to the account on your device.

Download the Trading Platform

The next step is to download and install the trading platform on your computer if there is such an option. You can also opt for an app or a web platform. Here, enter your login credentials to gain access to your demo account.

Start Trading

After gaining access, you can start using the available tools to analyze the charts and place your trades. Here, you can continue your journey of practicing and learning until you are ready to risk real money.

Above is the TradingView web platform. fxxYou can access paper trading at the bottom panel.

What to Avoid When Paper Trading

Overtrading. Paper trading involves no risk on your side. Therefore, it is easy to overtrade when trying to force results. Doing this while paper trading can mean carrying the same to your real account. This would weaken your performance.
Risking too much. Again, it is easy to forget that you are practicing for real trading. When using virtual money, you can risk up to 50% of your account without feeling any emotion. However, with real money, risking too much can cause impulsive moves and poor performance.

How to Know You Are Ready for Real Trading

After paper trading for a while, you will realize that you are more familiar with how price action works. The best time to stop is when you have gained confidence. This means you have traded a strategy and kept records showing continuous growth in the balance. When you have achieved this, you can start using real money.

Furthermore, you can get an even better deal of maintaining no risk on your part while earning real money. FundingTicks is a futures proprietary firm that will give you $50,000 to start your trading career. All you have to do is prove your skills at the student level. After that, you can become a funded trader at the Master level with a profit split of 90%.

Conclusion

Paper trading allows traders to practice and learn before risking real money in the financial markets. There are many benefits to paper trading, like building confidence and testing strategies. However, it is important to manage risk properly. When you can consistently grow your account balance, you can move on to start trading in a real account.