What is paper trading and how can you get started?
Having a strategy that informs your trading decisions is a key part of increasing the probability of your success. With paper trading, you can put your strategy into action and track potential profits and losses with no risk involved.
Call 0800 195 3100 or email newaccounts.uk@ig.com to talk about opening an account.
Contact us 0800 195 3100
Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.
Visit help and support for more information.
Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.
Visit help and support for more information.
Call 0800 409 6789 or email helpdesk.uk@ig.com if you have any questions about trading or investing. We’re available from 9am to 5pm (UK time), Monday to Friday.
Contact us 0800 409 6789
Call 0800 195 3100 or email newaccounts.uk@ig.com to talk about opening an account.
Contact us 0800 195 3100
Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.
Visit help and support for more information.
Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.
Visit help and support for more information.
Call 0800 409 6789 or email helpdesk.uk@ig.com if you have any questions about trading or investing. We’re available from 9am to 5pm (UK time), Monday to Friday.
Contact us 0800 409 6789
What is paper trading?
Paper trading is the act of buying and selling assets in a simulated market environment – without the risk of losing real money – to track the potential success or failure of the positions opened. Also known as virtual or simulated trading, paper trading is generally done to test different strategies, formulate a trading plan, and practise in preparation for placing trades on a live account.
The term ‘paper trading’ is derived from the practice of writing down and tracking hypothetical positions – as well as the potential profits or losses arising from those positions – on paper.
Now outdated, the manual tracking of mock trades has been replaced by a digital equivalent offered by online trading platforms.
Paper trading on our platform
Both seasoned and novice traders could make use of a simulated market environment by opening a demo account with us. A demo account is a virtual market environment that aims to mimic the experience of real trading as closely as possible. This is so that you can get a feel for how different products and financial markets work without the risk of losing any money, so you can explore and experiment with confidence.
When you open a demo account with us, you’ll get immediate access to the virtual version of our online trading platform, along with a pre-set balance of £10,000 in virtual funds to practise with. Our demo account is free – you can use it for however long you want at no charge to you.
In addition to opening a demo account, we recommend that you browse through the various educational resources available on IG Academy to improve your grasp of the financial markets and explore the trading strategies that you could use. The academy offers interactive online courses, webinars and live sessions with our resident experts, whose insights could help boost your confidence before you start placing live trades.
Paper trading vs backtesting
There are lots of similarities between paper trading and backtesting. However, they serve different purposes. Paper trading mainly focuses on tracking how your trading plan or strategy performs in a simulated market environment in ‘real time’.
Backtesting, on the other hand, involves applying a trading strategy to historical data to test if it could predict future market behaviour. A retrospective look at a market can help you determine how a particular strategy might’ve panned out and whether a different strategy might’ve been more profitable. Based on your analysis, you’d apply the strategy you believed would yield the best outcome in a live trading environment under the assumption that similar prices, regulations and market conditions would be at play.
Like paper trading, backtesting offers both beginner and experienced traders a way to test their strategies. It’s often popular among traders who are interested in automation or coding strategies as well as those who want to take emotion out of trading.
While it’s possible that a market will perform as you predicted, it’s important to bear in mind that past performance is no guarantee of future results.
With us, you can use paper trading or backtesting on platforms like MetaTrader 4 and ProRealTime to customise your trading experience according to your preferred specifications.
Why use a paper trading simulator?
You can use a paper trading simulator to help build confidence in your strategy. This applies to both beginners and experienced traders who want to practise buying and selling without risking their money. The simulated environment mimics the live market in real time.
Moreover, there are various asset classes that you can get exposure to using a paper trading simulator to test your strategy. Using our demo account, you’ll be able to practise your strategy on over 17,000 markets.
Advantages and disadvantages of paper trading
| Pros | Cons |
|---|---|
| There’s zero risk of losing your real money since you’ll be using virtual funds | You won’t get any real-life gains from successful trades on a demo account |
| You can practise with no capital constraints and add more virtual funds if needed | Cannot adequately prepare for trading psychology in the live environment |
| You can test different strategies in a simulated environment that mirrors real-life markets without affecting trade volumes | Often tends to provide a false sense of success, when in real life you must also consider costs such as commission and tax |
| You can improve your overall knowledge of the financial markets and how to trade different asset classes | Your trades don’t have a real-life impact on financial market aspects such as volatility, liquidity, and supply and demand |
How to start paper trading
To start paper trading with us, you’ll need to follow these few steps:
- Learn how trading works
- Open a demo account with us
- Review the market using technical and fundamental analysis, then select your opportunity
- Choose between going long and going short, and input your position size
- Take steps to manage your risk
- Open, monitor and close your position
FAQs
What does paper trading mean?
Paper trading is the practice of opening and closing positions in a simulated trading environment in order to gauge how a specific strategy might perform in live market conditions. You’d record any insights gained from your paper trades – not necessarily on paper – and use them to help guide your decisions when you’re ready to start trading live.
Does paper trading make you money?
There’s no money to be made from paper trading that has value in real life. This is because you’ll be using virtual money to place trades in a simulated market environment. Your potential profits will only be in virtual money. This also means that possible losses incurred during paper trading won’t have any real-life consequences.
Is paper trading good for beginners?
Yes, paper trading is good for beginners because it allows testing of strategies in a simulated market environment without the risk of losing real money. As a beginner or experienced trader, you can practise on different asset classes using paper trading. It can also help you formulate your trading plan, and build confidence in your strategy and market knowledge.
How can I practise trading without money?
You can practise trading using virtual money via an online paper trading simulator to take positions on various markets. You’ll use virtual funds to place your trades to test whether your strategy works or not – you can then record your profits or losses. With us, you’ll use our demo account to practise trading using virtual money.
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1 |
Best platform for the active trader, best multi-platform provider and best trading app as awarded at the ADVFN International Financial Awards 2024. Best share dealing platform as awarded at the YourMoney.co.uk Investment Awards, 2024 |
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