Every trader and teacher boasts the effect of paper trading (Sim or Demo) on your trading career. We’ve all heard practice makes perfect. However, when it comes to trading, there is a large psychological factor that plays a pivotal role in your success. Something paper trading cannot teach you. In this article, you will learn why paper trading is the worst! Take that with a grain of salt, the activity of paper trading does have it’s time and place in your career.


What is paper trading?

Often called Demo trading or Sim trading, practice trading is available to traders on most if not all trading platforms. Demo trading in platforms lets traders trade markets without risking any money, rather than fake paper money. You can typically set your Demo account size to match what you intend to start with when you trade Live. This way you can replicate your reality a little closer.

Demo trading is usually a different login to your trading platform or brokerage than your Live, real money account. This way everything is risk-free in that Demo environment. For the most part, you will be placed in a realistic simulated environment. Meaning that you will have access to real live data and live markets, however the trades you place in this account will not be with real money. Won or lost.

what is paper trading


Why do people paper trade?

It may seem obvious why people might Demo trade, they want to practice without losing money right? The beginning part of a person’s trading journey is an emotional roller coaster. Ups and downs, capital wise and mentally. People don’t really know what they don’t know and getting into the market after just absorbing theory is not the way to go. You will get humbled quickly. It takes practice and action to really understand how the market works and how you can take advantage of the market moves.

Paper trading allows you to trade the market, learn from the market, and gain confidence in the market without taking risk. However, that means that you may do things a little differently in Demo that you wouldn’t if there was real money on the line. Demo trading is good to get your foot in the door and start practicing. However, there is such a thing as overstaying your welcome.

Traders often find comfort in a simulated trading environment. They don’t have to risk any money and get a confidence boost. When they move to live money trading, they see that it’s a lot more difficult than they would have thought, losing money and getting frustrated. Doing what they’ve learned in Demo, which are not good habits. Demo is easy, you can be right and make money all the time, building bad habits that can translate to live trading.

There is a huge psychological difference between trading Live and Demo. The aspect of risking live capital completely shifts a traders emotional control and behavior in the markets. This usually causes traders to go back to Demo where they feel safe, where they can get away with bad habits. The more you stay in Demo and don’t learn in a live environment, the more you’re hurting yourself.

Demo trading is great to learn the basics, how the platform works, how the market works. Putting on trades, taking them off, and backtesting your strategy for a few weeks. Past that you begin to overstay your welcome in the Demo world. Past the 1-1.5 month mark, you start to build comfort in the demo world.

There are a lot of platforms in the world that offer demo trading, both for free and paid versions.

Free Platforms:

When it comes to Free platforms, it depends on the asset you trade. It is a little more difficult to get a qualified free demo trading platform, because data costs money and to trade demo as realistically as possible you would want live data. Some platforms offer live data for some assets, delayed for others. Here is a list of our favorite free demo trading platforms.

Trading View
  • Offers all assets, a great and easy platform. Online trading.
  • Forex & CFD program. Has a wide range of products and an easy to use platform.
Think or Swim
  • This is another multifaceted platform, that allows traders to trade any asset they wish.
  • They do offer the data for free, so they may be your best bet for free platforms.

Paid Platforms:

Then you get into the more sophisticated platforms and assets that require traders to pay to practice. Platforms that provide real time data do have a price tag on them. Those that are more intricate and customizable for traders as well. Rather than the simple approach.

Sierra Chart
  • High customization ability. Relatively inexpensive, can find any asset on the platform.
  • Factor in the cost for the data feed you wish. Futures markets are roughly $30/ Month and the platform is $30-35/ Month.


What is an alternative to paper trading?

If you are a little scared of demo trading for too long, ease up on yourself. You don’t necessarily have to fall in the pitfall of building bad habits in Demo, nor do you have to overstay your welcome. There are alternatives for this. Especially in the futures market. Or the margin market. You can and you should get into the live market sooner than later.

Having said that, get into the live trading market after you’ve done a little practice and work in Demo. After spending about 1-month in Demo, learn your platform, your trading habits, backtest your plan, and get ready to dip your toes into the market. It may seem scary at first because you’re risking money. However, you are risking money to make more money.

In the futures market, you have the opportunity to trade Micro equity futures which are 1/10th of the risk of E-mini futures. If you trade Forex you can use smaller lots, but in the case of other assets, it’s a little difficult to scale down the risk. Find a market and asset that allows you to scale down the risk so you can learn in a real live market environment. Just like if you would trade the Micro equity futures.

In the ES E-mini market, you are risking $50 per point per lot. A regular stop loss is around $75 per lot, those moves happen extremely fast. If you are trading the ES Micro contract, you are risking $5 per point per lot, so a regular stop is $7.50 per lot. Meaning you can take on 3 lots, risking $22.50 per position which is still 30% of the regular 1 lot on the ES E-mini. Obviously you won’t be making as much with Micros but you’ll be learning a lot.



To wrap this blog up, don’t overstay your welcome in paper trading. It creates bad habits that you can take with you to the live environment which will be hard to mitigate after a while. Try to get into the live market just when you’re gaining some confidence to earn some good money. You may get humbled but careful if you want to retreat back to demo. Find a lower risk asset to practice with. Happy Trading!


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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.