Paper trading is an excellent exercise not only for inexperienced traders but also for professional traders. The best thing is to fix a goal before you start paper trading. This target acts as a stimulator that maintains your speed and passion for trading.
Suppose your goal is to get 1% profit in the first month and 2% in the next 3-4 months. For this, you spend your time in a demo account and speed up your work.
Most beginners get bored with it and ask how long they will stick to it.
When Should you stop paper trading?
If you attain your goal in consecutive 5 to 6 months try to enter the live market but with a small amount. Never stop paper trading completely even if you become a professional and profitable trader. Do what you feel is right for you at the right time.
Less than 1% is not a good goal because low expectations produce low-level success.
Now we take a closer look at paper trading, and its pros, and cons. Also, discuss how we start paper trading and when we will switch to a real account.
When Should You Discontinue Paper Trading
Paper trading is such a trade when a trader takes simulated trade. Many forex, stock, future, option, and day trading markets introduce demo accounts for paper trading.
The duration of paper trading depends on which type of trade you adopt.
In forex trading due to high liquidity, you can learn much in 3-4 months. But if you spend time in longer-term swing or position trading you should consume 6 months to one year because in this fewer trades occur.
Paper trading gives you training on how to invest in different funds and indices. As it has no risk traders take bold decisions.
How Long Should I Paper Trading
It depends on how much time you give to practice for learning and becoming an expert in the basics of stock trading. Some learners set their goal to achieve at least 2% profit. You are lucky if you are successful in the first couple of months. The time duration should be 4 to 6 months.
For serious and passionate traders, a time of 6 months to one year of daily 2 to 4-hour practices is necessary for paper trading. It helps you enter the live market and makes you a successful trader.
How Long Should I Paper Trade Before Jumping Into Future And Commodities with Real Money
Paper trading lets you learn how to trade commodities without risking real money. It does not give you complete experience but it makes the learning process much faster. There are many websites or trading platforms that give you proper guidance and equipped you with proper skills.
These websites keep records and traders can check their profits or loss after every trade.
It is useful for both beginners and expert traders. Yes, for both.
A beginner may take 6 months to one-year time and a professional trader can take 3 years in live trade to be consistently profitable. Experts can check their new strategy by backtesting on paper trading and bettering their work through previous experience.
Where Should I Practice Paper Trading
[Which Platform Is Best For Paper Trading]
Before we enter the stock exchange business, we should prepare for it. For this, you may use many platforms. Here we provide a short list of very famous websites. All these provide you with free service in demo accounts. Opening a new account takes a few minutes.
- Interactive Broker
- Trade Zero
- Olive Invest.
Trade View and Money Bhai are famous in India.
Recently, many apps like Metatrader4 and 5 in forex allow demo accounts. They provide virtual money and offer you to trade in different categories of Forex.
It would be best if you stayed on paper trading until you become consistently profitable. This may take 4 to 6 months. Smart people master the trade very quickly.
Pros and Cons Of Paper Trading
There are many advantages and disadvantages of paper trading. We can check it in various ways. It is a gateway to success for beginners but never stuck too late to it. Try to enter a practical field when you feel it is the right time to trade.
Advantages Of Paper Trading
- It is risk-free trade. You can perform many operations without any hesitation
- It is quite a stress-free option. You can use it without any harm
- You can make your strategy and try to check it on a demo account.
- You got a lot of experience and felt something new you got.
Disadvantages Of Paper Trading
- It does not give you real data. Data is often delayed data. This may be harmful because you think this stock should have the same price you use in paper trading. But that is changed in a live market.
- It does not tell a good time frame for entering or leaving the market.
- As paper trading is not done with real money, you take it easy.
- You can not learn money management because in paper trading, usually, a large amount of money is given to the trader. However, it is not big enough but more than you have in your account balance.
- During paper trade, most of the companies do not include brokerage. This will be harmful if, in reality, you make a small profit but due to brokerage being more than your profit, you are going to lose money instead of gain.
How To Switch From Paper Trading To Live Trading
Each student is unique, and his learning doesn’t depend on time but rather on a percentage of success. If you are a teacher and want to allow your student to switch from paper trading to live trade.
You should see at least a 70% to 80% success rate. It means they should have 7 to 8 profitable trades out of 10. While the rest may show small losses. A 50% rate of profit is not enough.
If you have low expectations in paper trading, it reduces the possibility of washing your main capital in real trading.
Paper trading is a great way to learn about the market and develop your trading skills. However, it is important to remember that paper trading is not a long-term strategy. By continuing to paper trade for too long, you may end up losing money on your investments. Instead, it is recommended that you use paper trading as a way to gain experience and test out your trading strategies. Once you have a good understanding of the market and your trading skills, you can start to invest in real markets.