There exists a way to practice your trading strategies without risking your money: Paper Trading. This tool will help you train and prove your trading abilities as if you were operating in the real market. 

Trading without experience can be problematic: you could lose money and never want to try it again. That being said, you should start learning the basics of financial trading and then start practicing with paper trading. 

Keep reading and find out what is exactly, where you can do it, and what you should consider while using a simulator.

What is Paper Trading? 

Paper trading is a simulation tool where you can practice buying and selling securities in the financial markets. The objective is to function as if it was the actual trading operation, but instead of using real money, you use fake.

Because you do not use actual money, your trading activity has zero risks. You can try any trade position you want to practice; the intention is to start getting familiar with the operation of the markets.

As a beginner, you should start with paper trading before operating with your real money. You will benefit from the experience you earn and put into practice your analysis or strategy.

Contemplate that you are using fake money; for instance, you can not earn money while paper trading.  

Where can I do Paper Trading? 

You can find many trading platforms with great tools for Paper Trading; but to make this easier, I will share with you some of the ones we know at MDC Trading Academy

  1. NinjaTrader: This trading platform offers software to operate the financial markets and broker’s services. You can also use it to practice trading with futures, forex, and options. Its simulator lets you do backtesting and automate operations.
  2. Quantower: is a project created by developers with the mission to offer high-quality trading functions. It has connections with multiple brokers, and you can customize the tools in your account according to your trading style. 
  3. Thinkorswim: is a trading platform that gives you access to advanced trading tools to operate the financial markets. It has more than 4.000 technical studies as support, resistance, and candlestick charts. Besides, you can use sophisticated tools such as Fibonacci. 
  4. Tradovate: it is a cloud base platform free of commissions looking to satisfy your needs for trading futures. It has options to market rewind, personalized attention by chat and phone, and more than 40 trading tools.
  5. Multicharts: with this platform, you can access indicators, tools, and advanced options for Day Trading. It has long-term trading tools, high-definition graphs, and high-precision backtesting options. 
  6. Trading View: trading online platform with tools to analyze the financial markets; you can use graphics, real-time data, and access to news. Thirty million traders and investors around the globe use this platform. You can access more than 100,000 indicators built up by their community, such as volume indicators and candlestick charts. 
  7. Trade Station: This desktop platform provides the tools with the necessary speed and flexibility to operate and analyze the financial markets; also, you can share knowledge and tips with the community.

How to Set Up a Paper Trading Account? 

Creating a trading simulator account for paper trading may vary from one provider to another. It is an easy process: you need to choose a trading platform, create an account or download the software and follow their instructions.

For example, you can download and use NinjaTrade you will need to follow their installation guide.

How to do Paper Trading? 

Paper Trading is a great learning tool, and there is no precise way to do it. Focus on practicing, making mistakes, and understanding how the financial market behaves. But, even if you are practicing, try to be professional and trade to win: it will set the right state of mind for you in the future.

There are six steps you need to follow to know how to start paper trading

  1. Learn the basics: you have to start educating yourself about financial trading. Get familiar with the trading vocabulary so you can understand better. You can check out our blog to read many articles about trading
  2. Find a platform: find the one that best suits your objectives and needs. Check things such as educational content, user experience, and technical support. Also, consider the reputation of each platform and the tools they offer.
  3. Create your account: set up your account and get familiar with the platform. Many offer tutorials and guides for their software; that will make it easier to learn to use it. 
  4. Create a strategy: your trading strategy consists of a guide that describes how you will operate the market, things such as type of security, financial market, trading style, and more. 
  5. Practice your trades: this is the exciting part! You will try everything you have been learning. Place different orders, try operating distinct types of securities, and sell and buy without risk. 
  6. Take notes: you must understand your traders. Be critical about your operation: pay attention to your results. Write everything you try and any new things you learn.

What is the Difference Between Paper Money and Live Trading? 

Many people ask us at MDC Trading Academy: What is the difference between Paper Trading VS Live Trading

It is simple. As I told you, Paper Trading implies using fake money, practicing and proving your strategy. Meanwhile, Live Trading is the negotiation of securities in the real market using real money. 

Many simulators can represent the actual market with much accuracy. It means you can operate in an environment practically identical. So, in terms of tools for analysis such as graphs, indicators, or automatic orders, there is no difference between Paper Money and Live Trading. The main difference is the usage of money.

The Benefits of Paper Trading 

We like to promote at MDC Trading Academy to treat trading as a personal business, and simulation is the starting point for your business operation. Thus, use this tool as much as you can to learn. 

The following are some of the benefits of Paper Trading: 

  • Don’t risk your money: You can lose money while trading, and this risk is higher when you are a beginner. For this reason, a simulator can help you practice without fear of losing your money. 
  • Learn about the market: Understanding how the market behaves is crucial for trading. Thanks to Paper Trading, you will learn how securities prices move to analyze how many variables influence the financial markets. 
  • Learn how to use a platform: a trading platform will be your tool for operating the market. Understanding how to use and take advantage of its tools will take time. But do not worry! Because it is a risk-free tool, you can practice with all the tools to prove how they work. 
  • Try your strategy: operating the market requires creating a trading strategy; it is a great idea to prove and explore how it works in a simulator. It will help you to make changes and improvements. 
  • Identify weak and strong points: making mistakes as a beginner is common. You should take advantage of your bad and good trades and be critical of them. Try to understand what you are doing to replicate your good practice and correct your mistakes. 
  • Rewind the market: some trading simulators have the option to rewind the market. You can use this to go back some days, simulate your operation and prove if your strategy would be effective.
  • Get ready for live trading: operate as if it was the actual market. Setting up a professional state of mind will prepare you for live trading.
  • Understand your feelings: There is something called Trading Psychology, which is mental aspects that influence your state of mind while operating the market. It is crucial to identify which emotions you have while trading to learn to control them. 

Paper trading for beginners and more experienced investors is a great tool to prove strategies or new techniques to operate the market. So do not neglect that you can use Paper Trading during your trading career.

How to Learn Paper Trading? 

You should understand the basic concepts of financial trading: it will be the foundation for your career. The rest is practicing as much as you can. Even though paper trading implies using a simulator, try to think like a professional and do your best every time you operate the markets. Be critical and analytical about your proficiency as a trader.

Choose a trading platform and learn everything you can in its simulator. You can pick one of the many I mentioned, like NinjaTrader, which has a great simulator with many tools and data to practice with. 

As you can see, learning and practicing will be your main objectives for starting your trading career. In MDC Trading Academy, we can help you with both parts. Thus I invite you to join our Free Basic Trading Course to learn about the types of markets you can operate and how to analyze them. Everything you need to know to start you to be a professional trader!


What is a Paper Trading Account?

To operate the market in a simulator, you should create a paper trading account on a platform. It is your access to all the simulation tools and a way of setting up a profile for recording your practices.

Is Paper Trading Real Money?

No, paper trading is fake money. You are simulating your operation as if it were real because it represents the actual market. Nevertheless, it is just a tool for practicing using fake money. Thus, you can earn money.

Sebastian Zuluaga Senior Trader de MDC

Sebas Zuluaga

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Senior Trader with more than 5 years of experience in the Futures Markets. With a degree in Business Administration from the University of Antioquia. A former profesional soccer player for the Colombian national team, Sebas began his trading career in college and it has become his exclusive source of income. Sebas has become and expert motivator and speaker and has personally worked with more than 500 traders to achieve their goals.