What's holding you back from investing in stocks? Is it because — like many of us — you're scared of “getting it wrong” and losing your hard-earned cash. Stock investing can be a little nerve-wracking at first, but luckily, some brokerages offer a way for you to get the hang of it before putting any real money on the line. This is called Paper Trading.
Paper trading is also sometimes called virtual trading. It involves practicing placing buy and sell trades without risking a cent. New traders use this service to fine-tune their stock investing strategy before committing their money to a brokerage account.
Best Paper Trading Apps
A lot of online stock brokers don't offer paper trading to simulate investing. This is a shame because it's a handy way to test-drive a broker before committing any actual money. If you're new to active stock investing and shopping around for a brokerage, whether or not a platform offers, virtual trading might be a consideration worth making. Here are our favorite free paper trading options.
- TD Ameritrade thinkorswim's paperMoney
- MarketWatch's Virtual Stock Exchange
- Investopedia's Stock Simulator
1. TD Ameritrade thinkorswim's paperMoneyTD Ameritrade‘s thinkorswim platform. With thinkorswim's paperMoney feature, you can get “elite-level” trading tools and resources, including insights and information about even really complicated strategies such as options, futures trading, equities, and forex trades.
When you sign up for a paperMoney virtual account, you'll get both a virtual margin account and a virtual IRA, each funded with $100,000. This lets you test out your trades not only in a taxable account but also in a tax-deferred account.
2. E*TRADEtrade stocks, options, and bonds, E*TRADE also has a paper trading service. You can see your trades' impact on your account before you execute them, which is great if you're a DIY investor.
If you have an account with E*TRADE, you can access the service online or on the app.
- If you're in the app, just click on the paper trading icon and log in.
- If you're on the web, login and turn on the paper trading option on the top of the screen.
From there, you can set up pretty much any type of trade, from stocks to options. You can then monitor your positions in the paper trading portfolio, which is kept separate from your investing portfolio. If you want to try another trade, you just need to reset your account.
You don't need to deposit money to trade with a paper account, although you do need to have an account with E*TRADE already.
3. Webull Paper TradingWebull offers a free paper trading service so you can try out new investing strategies or familiarize yourself with investing. The service is easy to use via their app.
All you need to do is click on the paper trading icon. All paper accounts are given $1 million to start trading with. From there, you can buy or sell stocks in the simulated account that looks and feels just like what you would expect from a brokerage account.
4. TradeStationonline stock broker that offers a virtual trading account within the app. You can use this to check out platform features that you might not usually use, such as advanced orders, strategy automation, or other market types.
With this simulator, you can gain real-time, no-cost trading experience — and see the power of fully automated trading firsthand. Ultimately, you can test new markets and new strategies — without risking a cent.
Stock Trading Simulators: Practice Trading Using Fake Money
You can also practice by signing up for stock trading games. These trading simulations sometimes let you compete against friends or strangers as you select investments for a virtual portfolio.
5. MarketWatch's Virtual Stock Exchange
6. Investopedia's Stock Simulator
What Is Paper Trading?
Paper trading is a type of simulated investing where individuals can test the waters of the market without putting any of their money at risk. Using this service, investors can practice buying and selling stocks. Because it’s all fictitious, paper traders don’t have to worry about losing money, but they also can’t make any money.
What Is the Dummy Stock Market?
A dummy stock market — also known as a virtual stock market or stock market simulator — is simply a trading platform where individuals can engage in paper trading. Dummy markets are typically smartphone apps and websites; some are even offered by major brokerage firms. These stock market simulators usually mimic the performance of the real market, so investors can see how they would have fared if they’d invested in the stock market for real.
Paper Trading vs. Live Trading
Virtual trading platforms can feel just like the real thing. But when you're actually trading, you might find that having your money on the line affects your performance differently. Paper trading can give you a feeling of false security, and when you go to trading stocks live, nerves and emotions might get in the way and influence your trades.
In the old days, we paper traded by writing the details of our pretend trades down in a notebook. Today many stock brokers offer virtual trading apps that allow you to complete paper trades using a simulator that looks and feels just like the real thing.
These virtual trading accounts use real-time information to help you gauge your success. That means you can create and test a trading strategy and practice building a portfolio just as you would once you're trading for real. Since it uses real-time data, the actual performance will be reflected in your results.
And if you already have experience buying and selling stocks, you can check out many services for a test run for making more complicated trades such as options and futures.
Pros & Cons of Virtual Trading Accounts
- Your money is safe — There's one huge benefit to paper trading: You won't lose any money. If you're just starting out, you can get the hang of buying and selling securities using a particular trading platform without losing any money if your picks turn out not to be winners. It's also the perfect opportunity for testing out a new trading strategy too.
- Spend as much time as you need — To maximize the potential of paper trading, spend as much time and effort researching a trade as you would if it were real. This means thinking about how long you would need to hold a trade, what limitations might be placed on your portfolio, and whether or not the stock is worth the risk.
- Powerful learning tool — Don't think of paper trading as a game in which you can make risky trades just to see what can happen. Use it as a learning tool that's preparing you for real trades. So don't try to use it to day trade if you're an investor who can't afford to take risks.
- No gains — Just as the significant benefit to paper trading is not losing any money, on the flip side, the biggest drawback of paper trading is this: You won't see any gains. That might have you yelling, “Darn!” when you realize a gain that would have made you a decent return. (That and $2 will buy you a cup of coffee, right?)
- You don't get the full picture — Also, paper trading might not give you the full picture when it comes to commissions and fees. Although most of the online brokers have eliminated commissions on many trades, many still charge fees for options contracts, for example.
Is Paper Trading Free?
How Long Should I Practice Paper Trading?
How Do I Start Paper Trading?
Can I Make Money Paper Trading?
What Is Dummy Trading?
What Is a Dummy Portfolio?
Virtual Trading Accounts: Try it before you buy it
Paper trading or using a virtual trading platform can help you learn how to complete both simple and complex trades without risking a cent of real money.
However, keep in mind that this might give you false confidence in the markets. No investment is without its risks, and the kinds of quick trades you make when paper trading can be particularly dangerous. If you have a shorter time horizon until retirement or are risk-averse, it's best to avoid active trading and instead let a passive robo advisor such as Betterment to maximize your investments for you.