What is Paper Trading?
Paper Trading refers to demo accounts and games of trade that are commonly used today, for novice traders, mostly, in order to learn new strategies and handle with the agility to operate in forex markets and not lose your capital.
It is known in this way because the operators were about to start, not too long ago, wrote their possible movements and investment in a role and in this way, ensuring the profitability of your investment, but Is it really necessary to use these tools on the part of new traders? The truth is yes and here’s why.
Education is the key to success in this competitive world, hence, the use of simulators allows you to do test transactions that you can then apply them in real-time transactions.
However, there are certain platforms (for call it somehow) that will help you achieve your goals and with which you’ll be able to avoid losses: the simulators or games of trading, the demo accounts offered by the brokers or the worksheets, papers, and pens, that today in day is considered “old school”.
These simulators, also known as “commercial games”, allow you to practice with dummy data and learn about the most basic of markets. What is certain is that they are not a very good idea, because you will not see in real time what is happening in the market and, therefore, you will not be able to develop the right strategies.
The good news is that there is a better option to help you achieve your objectives: the tools of your broker (Broker tools).
Tools of a broker
These tools will be demo accounts that will get you on the right path. The main difference between these demo accounts, and the commercial games, is that with demo accounts you will be able to use the same tools, features, and stock data that are used when you work in real time or, perhaps, with a few minutes of difference.
In addition, these tools tend to be free. In Libertex you offer to trade with a demo account at no additional cost so that you can test and refine your strategies and as well, begin to open positions for buying and selling in the market.
Worksheets, paper and pens
As mentioned above, this method is the oldest and nonetheless be highly effective.
With a spreadsheet, paper and a pen you’ll be able to, for example, to write the new orders of entry, the price of the asset that you want to purchase, the amount of shares you want to buy, etc, Then, when you want to close the transaction, you write the current price of the bid and review what were your gains (or losses).
Or, you could take note of the strategies that you used and your reaction at the time you opened the position. In this way, if there is any error you will be able to modify it to get greater benefits in your next operation.
Advantages and disadvantages of Paper Trading
The Paper Trading entails numerous advantages, always and when it is used correctly. Its main advantage is that will help you prepare to operate in real-time markets, but this is not the only one. In the same way, brings with it certain disadvantages that you will need to take into account at the time of putting it into practice.
For this reason, we show in detail each of the benefits or drawbacks that the Paper Trading offers to the traders:
You will not run any risk
Thank you to with the Paper Trading does not involve real money, the risks of losing money are non-existent.
You’ll be able to practice new strategies and improve the previous
With demo accounts you can apply the same strategies and use the same functions in the real market. In the same way, you’ll be able to study past actions and improve them (or keep them if you’ve had good results).
You will learn the operation of the online marketplaces
Due to the great similarity in features and options between demo accounts and the accounts on-line, you will feel at home when you decide to take the leap to the real-time operations.
The majority of demo accounts do not show the updated data. Normally you are presented with fifteen or twenty minutes of delay, there are even some that handle false data. However, the free demo account of Libertex gives you instant information and real data to be able to manage any scenario in a volatile market.
To not involve your own money or real money, traders who start in this world is exposed to be carried away by their emotions and make operations risky, which could hinder them greatly if they operate in an online market, where losses can be considerable.
Why should you make use of the Paper Trading?
As we have mentioned above, the Paper Trading is a great tool for those who wish to dabble in this world of online trading, as they will learn from the most basic to the most profound, and without a doubt… do it hand-in-hand with the demo account Libertex option is more secure and reliable.
However, it is necessary that each of the operators to study about the psychology of the trade, because not only is it in control of our positions in the market, we must also control our mind.
The psychology of the trade, despite not being very known, ensures that operators act rationally as opposed to certain moments that are listed as risky for your investment. Among the most common emotions that you may feel a trader are: greed, fear, hopes, and regrets.
Therefore, it is necessary to know the type of trader that you are and the risks that it might cause. It is about knowing the possible scenarios, whether in your favour or against, to act on behalf of your interests (and your investment).