Paper Trading
Psychology
What it means
Trading with a simulated account using fake money, so you can practice execution and test a strategy without financial risk.
Example
You open a paper account with $10,000 fake dollars and trade your strategy for two months. You confirm it is profitable, then start a real account with $1,000.
Mistake beginners make
Beginners treat paper trading like the real thing because there is no fear. Paper trading tests the strategy, not the psychology -- real money feels completely different.
Related terms
- Backtesting — Running a strategy over historical data to see how it would have performed, before risking…
- Trading Plan — A written set of rules covering what you trade, when you enter, when you exit, how much yo…