Online paper trading allows individuals to simulate the buying and selling of stocks without actually risking real money. There are many websites devoted to this practice, most of which offer the service for free or a small fee. The lure of online paper trading is that it allows potential investors the opportunity to get the feel for stock trading and different strategies. Some of the websites that allow such trading set it up as a game, offering prizes to the best of the simulated investors.
The stock market offers the opportunity for individuals to grow their fortunes and provide financial stability for themselves and their families into the future. Due to the nature of trading, however, there is also the potential to suffer extreme personal loss if the wrong strategies are chosen. For individuals deciding whether or not to test the trading waters, online paper trading might a good first step. It allows exposure to the stock market with nothing to risk except imaginary accounts.
Many of the websites that offer online paper trading also offer tutorials on trading to help up out the aspiring investor. This can be just as valuable as the simulated trading, because understanding the myriad nuances of trading can be overwhelming to newcomers. Some of the websites are devoted entirely to this type of simulated stock experience. In addition, some actual online trading sites offer simulated trading as well, a practice that might stimulate business if the simulated investor then attempts the real thing once he or she is comfortable with the way the site works.
When an individual chooses to begin online paper trading, he is usually given an imaginary account. He then makes trades of actual stocks and futures, and his account reflects these trades. As the stocks rise and fall, the account then shows the success, or lack thereof, of the simulated trades. In this way, the investor can get a feel for how she would be doing with real money, and the experience gained can aid her when she decides to press on to the real thing.
Some sites that allow online paper trading set them up in much the same way as fantasy sports sites, which allow individuals to create teams whose performances are determined by the performance of actual professional athletes. These sites tally up the accounts of the investors and may offer prizes for the most successful. Such sites may lure actual traders to try out some risky strategies to see if they might be useful in their actual portfolios.
