Paper trading is the practice of simulating trades that allows traders to practise their trading skills without risking real money. The proliferation of online trading platforms and software has increased both the ease and popularity of paper trading. Today, paper trading looks like using an online stock market simulator, which can look and feel pretty much like an actual trading platform. Simulators allow investors to trade on live markets without the input of any actual capital. Hence, there is no risk with paper trading. This process can help in gauging whether one’s trading strategies or investment ideas are worthwhile.

Paper trading is an incredibly helpful tool for new traders. Not only can traders practise their trading skills on these platforms, but they can also backtest any trading strategies to check for their efficacy. Traders can familiarise themselves with different types of orders, such as stop-loss orders, limit orders, market orders, and more. Ultimately, trading on a simulated platform is like practising on the actual market without any risk. Hence, it is a highly effective way for beginner traders to get the hang of trading before they step onto actual trading platforms.