A paper trading platform refers to a simulation tool used by individuals who wish to practice online financial trading without risking real money.
These platforms are also referred to as paper trading apps, and are very popular in forex, cfd and stock trading.
They mimics the functionalities and environment of a live trading platform, allowing users to execute trades based on real-time market data. However, the trades are only virtual, and no real capital is at stake. This allows traders, especially beginners, to gain experience, develop strategies, and build confidence before diving into the actual stock or forex market.
In 2023, with advancements in technology and an ever-increasing interest in trading, the competition among paper trading apps has reached new heights. As a result, traders now have access to a wide array of platforms that offer realistic simulation experiences to sharpen their skills without risking any real funds.
In this article we’ve assessed dozens of trading platforms that offer paper trading, and come up with 10 with the most comprehensive offer that will prepare you for real money trading.
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What are the best paper trading platforms?
Below our curated list of the paper trading platforms and apps, showcasing their features and characteristics to practice trading.
What Is Paper Trading?
Paper trading is a form of simulated trading of commodities, currencies or stocks in a way that does not involve any actual funds. Paper trading accounts are used to learn and understand how to operate in the financial markets without risk.
The name is derived from the way up-and-coming traders would learn how to operate in real markets decades ago. In the past, traders without much prior experience would practice trading on paper, recording every single hypothetical transaction by pen. Then, they would track their positions against the actual market to see whether they would profit or not, as well as plan their next move.
Nowadays, these pieces of paper have been replaced by electronic market simulators. At first glance, it’s almost impossible to tell them apart from real money trading platforms – they have the same interface and follow the same market patterns. The only difference is that all trades carried out on these simulators are done using virtual funds, and traders can’t make any actual profits off of them.
Are paper trading apps actually risk-free?
Paper trading apps are genuinely risk-free. These platforms allow both new and experienced traders to engage in market trading without any actual financial exposure as everything within these apps, from the gains to the losses, is entirely virtual.
Paper trading apps are not only devoid of real-world monetary risks but are also devoid of obligations. This means a trader can experiment and practice without any pressure or time limit to transition to a real trading account.
Furthermore, the beauty of these platforms is the inherent privacy and security they offer. They don’t require you to provide sensitive personal information like your full name, address, or bank details to brokers.
The registration process is simple; typically, all you need is a username, email, and password. Occasionally, some apps may ask for a phone number, but that’s often the extent of it.
Is paper trading simulation accurate?
Paper trading accounts are designed to simulate live trading environments as closely as possible. They provide a real-time price feed, mirror the interface of a live trading account, and even simulate broker commissions.
However, there are certain limitations when trying to simulate slippage, requotes and the psychological aspect of trading.
Slippage and Requotes occur when there’s a mismatch between a trader’s order and available orders in the market. In a real account, if someone tries to purchase an Apple stock at $100 and no one’s selling at that price, the broker may execute the order at the closest available price, like $101. This disparity is called slippage. In paper trading, such events don’t occur because all transactions are virtual.
The psychological aspect is a key aspect of trading with real money. In a simulated environment, even though the setting mirrors the real market, the trader is aware they’re using virtual funds. This knowledge often alters trading behavior. Real-world trading brings with it emotions like the thrill of gains, the dread of losses, or the pressure and the rush that can lead to a bad trading decision, which simply can’t be replicated in a paper trading scenario.
How long should a trader practice with paper trading accounts?
The duration of paper trading is subjective and varies from trader to trader.
Its primary purpose is to allow users to grasp the fundamentals of risk management and market analysis. Once a trader feels they have a solid understanding of these basics, they might consider transitioning to real trading.
However, transitioning doesn’t necessarily mean diving headfirst into high-stake trades. A prudent approach would be to start with micro or cent accounts.
These accounts require minimal deposits, often less than $10, providing an opportunity to experience real trading while still being safeguarded from significant financial implications.
This approach ensures that the trader gets a taste of the psychological aspects of real trading without risking large sums.
How Can I Open a Paper Trading Account?
In order to open a paper trading account you have to provide an email and a password to your broker of choice. The broker will then give you access to the trading account where you will be able to buy and sell assets with the virtual money provided.
Keep in mind that the brokers we’ve listed here are not the only platforms you can use to practice trading. Popular websites like Investopedia or MarketWatch also have their own paper trading sections that allow users to dip their toes in the world of trading.
They’re a good starting point, but as opposed to the demo accounts offered by live trading platforms, they do not recreate the interface and all the intricacies of real money trading apps. This is why, if you’re determined to move onto live trading at one point, you might want to do some paper trading on an actual brokerage platform.
Pros and Cons
- Allows you to simulate trades in a risk-free environment
- Offers a significant virtual budget to try out various strategies
- Good way to compare and contrast different platforms
- Does not reflect the emotional and psychological factors that play a role in live trading
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