Paper Trading – A form of familiarization and practice trading in the market, suitable for new investors.
Paper Trading Concept
Paper trading is transactions that simulate actual purchases in the market. These transactions take place in a virtual environment without using real capital. Currently, these transactions are often made on a number of different applications and software, or through paper-based notes and calculations in a way that has long been established.
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Paper Trading purposes are created
Paper Trading helps to verify the course of transactions, judgments and outcomes that occur outside the real market without incurring any losses. Market scenarios are still purely hypothetical. Its application to all financial markets such as foreign exchange, stocks, bonds,… Even crypto can’t bring high accuracy to everyone.
New investors can start trading practice with some virtual capital fixed on the ongoing market data in practice. That way, users can produce accurate results, try out a variety of trading strategies, learn how to assess emotions, and manage risk before putting money into real trades.
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Some limitations may occur.
The only potential drawback of this form is that it is possible to give investors bad habits when trading because the virtual trading capital is usually very large and does not correlate with the amount of capital you actually have.
Besides, the emotions of using Paper Trading are completely different from the emotions of actual trading, when losses do not give you a real sense of loss and profits only bring the Fomo (Fear of missing out) effect. However, this limitation can be minimized by limiting the amount of virtual capital and looking at the process of trading results in a more comprehensive way. This helps bring scenarios when trading simulation closer to reality.
Paper Trading is considered the cheapest practice method on the market. If your capital is not much, and is not confident in knowledge, then this form is still recommended. However, there are still many limitations that occur, if you abuse and apply incorrectly.