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published-date Published: January 7, 2024
update-date Last Update: January 10, 2024

Paper Trade

What is Paper Trade?

It’s a way for investors to practice buying and selling stocks without risking any real money. Back in the day, traders used to practice on paper before trading with real money, but now we have stock market simulators that look and feel like real trading platforms.

If you want to try one out, the best way to get started is to open a DEMO account

How does paper trading work?

Well, it’s basically a trading simulator that you can use to learn the basics of trading. It’s great for beginners and novice investors who want to get some practice before diving into the real thing. The idea is to treat paper trading as if it were the real deal. Think about your risk-return objectives, investment constraints, and trading horizon, just like you would with a live account.

You can apply paper trading to different market conditions. For example, if the market is volatile, you might experience higher costs due to wider spreads. You can also use paper trading to familiarize yourself with different types of orders, like stop-loss, limit orders, and market orders. Many platforms even provide charts, quotes, and news feeds.

The rise of online trading platforms and software has made paper trading even easier and more popular. Online brokers like WeBull, Trading212 and TradeLocker provide a mode where you can Paper trade thinkorswim offer paper trading simulators to their clients. It’s basically the same as their real trading platform, but without the real money.

How are Paper Trading and Prop Trading Different?

Paper Trading

In paper trading, traders can simulate various market conditions and analyze their hypothetical performance. They gain insights into market behavior, learn to interpret market indicators, and refine their decision-making skills. This type of trading is especially beneficial for honing strategies, experimenting with new techniques, or getting accustomed to a new trading platform. However, since real money is not on the line, paper trading may not accurately replicate the emotional and psychological aspects of live trading.

Prop Trading

Prop trading, short for proprietary trading, involves financial firms or banks trading stocks, bonds, currencies, commodities, derivatives, or other financial instruments with the firm’s own money, as opposed to using clients’ funds. This type of trading enables the firm to reap the full benefits of a successful trade but also means it bears the full risk of any losses.

Prop traders are professional traders who use the firm’s capital to make speculative trades. They are typically highly experienced and skilled in market analysis and trading strategies. Prop trading can involve a variety of trading strategies, from day trading to long-term investments, and can cover a wide range of financial instruments.

Prop trading is distinctly different from client-driven trading, where trades are made on behalf of clients. It’s driven by the pursuit of direct profit for the firm and involves real capital, which means real financial risks and rewards. Unlike paper trading, prop trading requires a deep understanding of market risks, strict risk management controls, and high levels of discipline.

How can I become a prop trader?

Becoming a prop trader is a challenging yet rewarding career path, especially for those with a keen interest in financial markets and a talent for trading. You can become one by taking a challenge on any of the prop trading company, we suggest FunderPro since you can use TradeLocker on it.

Advantages and Disadvantages of paper trading

Well, the main benefit is that you don’t have to risk any real money. You can test different strategies and techniques before using your own hard-earned cash. You can also familiarize yourself with various tools and decide which ones work best for you and your goals.

But paper trading does have its disadvantages. Since you’re not using real securities, your investment returns might be distorted, giving you a false sense of security. There’s also no potential for a return because you’re not using real money. So even if you make a good move in a paper trade, you can’t realize any gains.

It’s important to note that there are key differences between paper trading and live trading. Paper trading doesn’t come with the risks and rewards of using real money. Live trading requires a good understanding of how the markets work and the ability to recover from mistakes. Plus, when real money is on the line, our emotions and judgments can be different, leading to different behavior.


In the end, trading can be risky, but paper trading can help mitigate losses and raise the potential for gains. It’s a great way to practice buying and selling stocks without risking any real capital. Just make sure to be realistic and treat your paper trades as if they were the real deal, using the same amount of capital you would deposit into a real account.

So if you’re new to trading or just want to try out some new strategies, give paper trading a shot. It’s a safe and effective way to learn the ropes before jumping into the real market.

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