In short: With paper trading you practise with virtual money on real prices. That way you get to know a platform and order types without risking money. It does not teach you how it feels to lose real money.
Step by step
- Open a demo account with a broker. Many brokers offer this for free.
- Set a realistic virtual amount, similar to what you would really deposit.
- Write down your plan: what you buy, why, your stop-loss and your target.
- Trade as you would with real money, with the same rules for position size and risk.
- Record every trade in a journal: reason, outcome and what you learned.
- After a while, check whether you followed your rules. That says more than the result alone.
What you can learn with a demo
- How your platform works: where to find prices, orders and your portfolio.
- How order types work, such as market, limit and stop orders.
- How to work out a position size and place a stop-loss.
- How to keep a journal and review your own way of working.
- How market hours and the bid-ask spread work.
What a demo does not show
- Emotions. With virtual money you feel less fear or greed. That is exactly what makes it hard to stay calm with real money.
- Execution. Some demos execute orders faster or at a better price than the real market. Real orders can face a wider spread and slippage, especially in thinly traded stocks.
- Costs. Check whether costs such as commissions are included in the demo.
- Certainty. A good result in a demo says nothing about your future results.
How to make practice more realistic
- Choose a starting amount that fits your real situation. A demo with a much larger amount teaches you little.
- Use the same rules as with real money: how much you want to risk per trade and when you get out.
- Trade products you really want to trade, such as stocks on Euronext.
- Only trade during the market hours when you would really trade.
- Also note what you would rather have done differently.
Moving to real money
Moving to real money is not a fixed threshold you pass. Decide for yourself when you are ready, for example when you know the platform, your plan and risk rules are set and you only deposit money you can afford to lose. Then start with a small amount. It can help to make a few small real trades first to see how it feels.
Investing involves risk: you can lose some or all of your money. This tutorial is information, not investment advice.
Work it out yourself
Test yourself
Practice questions to check your understanding, not advice.
According to the tutorial, what does paper trading not teach you?
- How your platform works
- What it feels like to lose real money
- How order types work
Show answer
Answer:B. What it feels like to lose real money
With virtual money you feel less fear or greed. You do get to know the platform and order types in a demo.
Why can execution in a demo differ from the real market?
- Some demos execute orders faster or at a better price than the real market
- You cannot place limit orders in a demo
- In a demo the spread is always larger
Show answer
Answer:A. Some demos execute orders faster or at a better price than the real market
Real orders can face a larger spread and slippage, especially with thinly traded shares.
How do you make practising more realistic?
- Choose a virtual amount much larger than you would really deposit
- Do not use a stop-loss
- Choose a starting amount that fits your real situation
Show answer
Answer:C. Choose a starting amount that fits your real situation
A demo with a much larger amount teaches you little. Also use the same risk and exit rules as with real money.
According to the tutorial, what does a good result in a demo say?
- That you will also make a profit with real money
- Nothing about your future results
- That you are ready to deposit real money
Show answer
Answer:B. Nothing about your future results
A good demo result says nothing about your future results. You decide for yourself when you are ready, for example when your plan and risk rules are set.
Frequently asked questions
- How long should I practise before I start with real money?
- There is no fixed rule. Practise at least until you know the platform and the order types and you follow your plan consistently. A demo says nothing about future results. Even good results in a demo do not mean you will get the same result with real money.
- What is the biggest mistake in paper trading?
- Trading with an unrealistically large virtual amount or taking bigger risks than you would with real money. So set up your demo to look like your real situation: the same starting amount, the same rules for position size and a stop-loss.
- Is the result in a demo the same as with real money?
- No. Emotions play less of a part in a demo. Orders in a demo can also be executed faster or at a better price than in the real market. Real execution can differ, for example because of spreads and slippage.
- Where can I find a demo account?
- Many brokers offer a demo account. Compare brokers in the [comparison tool](/en/brokers/vergelijken) and check the broker's page to see whether there is a demo. Also check whether the prices are real-time or delayed.