Main Benefits
We outline the main benefits of paper trading, looking at how it shortens the learning curve so that beginners have an edge when it is time to play for real money.
It costs nothing and you cannot lose money with bad decisions or bad times. It also allows you to observe any loopholes in your analytical process so that you can begin the arduous task of creating a well-defined business advantage.
Trading evokes the twin emotions of greed and fear and often blinds participants to the key information necessary for effective risk management. Paper trading bypasses this emotional roller coaster so that the new participant can fully concentrate on the mathematical process, not the pitfalls.
The participant gains experience in every element of the trading process, from pre-market preparation to taking a final profit or loss. When entering the broker’s simulator, he learns how to use the software with real money in a relaxed environment, where winning the wrong hit does not trigger a financial disaster.
Making a series of complex decisions that are rewarded with hypothetical profits goes a long way in building the confidence of the beginner so that he can do the same when real money is at stake.
The paper trading for several weeks to a month creates useful statistics on the new strategy and new approach to the market. The results are likely to be intimidating, forcing the next step in the process of training the new trader, in turn requiring additional data sets and paper trading.
