What is Paper Trading in Stock Market?

“Practice makes perfect,” a saying that applies to both novices and seasoned professionals, holds true for both.

Your capital is safer when it comes to the stock markets the better you are at it. Practice, as you might have figured, is the only thing that will help you improve.

But when it comes to investment, the cost of failure is much more severe. Yes, you should spend your extra cash rather than the money used to cover your basic needs (you do that, right?). However, losing any money hurts.

What if I told you, however, that your money could be kept secure while you practice investing? Do not even assume that I am joking. Not at all… Thanks to the topic of today’s blog, “Paper Trading,” this is a very real option.

Paper Trading: Practice without Risks

Prospective investors and current investors can “practice” trading using this peculiar procedure termed “paper trading.”

I’ll confess that this “practice” includes direct stock market exposure. But there is a danger of loss and a chance that the investors’ money may be eroded because of this direct exposure.

The understanding of the stock markets has advanced significantly. A small number of people were initially thought to be “talented” in the discipline. Those outside of this group of “elites” continued to see investing and trading to be mysterious.

But when this barrier to entrance began to disappear, the general public gradually began to become interested in the stock markets. The demand for a formal and pertinent source of stock market education increased as a result.

As a result of online ed-tech platforms capitalizing on this demand, the public began to receive actual, worthwhile, and pertinent knowledge.

However, this isn’t a blog about the advancement of financial education in India. Although the state of that instruction has improved greatly, a practical approach is still lacking. After all, learning something for yourself is the only way to properly understand it.

Turning away from this digression, I returned to the subject at hand: there are some problems with the “practical approach” when it comes to the stock market.

As previously noted, understanding about the stock market directly exposes one to the risk of losing their wealth. People don’t mind taking risks since investing is a risk-taking activity, and practically all investors are game for it.

A bad start or the high probability of one is what is hard to take. When one realizes that most new traders have modest and limited starting money, the threat becomes more serious.

So why not just remove money from the equation if money (or rather, its loss) is the issue? Because paper trading is centered around this.

Paper trading enables investors to become familiar with a range of market situations and occurrences while also becoming conscious of their reaction to such stimuli. Since paper exchanges are done using virtual currency, money is not an issue.

This enables new participants to learn everything the stock market has to offer without taking any risks. Current players can sharpen their talents while protecting their corpus. Profits from this type of trading are never the goal because the money used is never actual money, and vice versa.

How to Start Paper Trading?

Paper trading manually worked well at first. This meant that individuals created trading scenarios in their thoughts using pens, paper, and other tools.

This process’s name, which was inspired by the use of paper, has endured. However, using this antiquated technique had the following drawbacks:

• Only those market situations that traders could foresee or thought were likely to occur were available to them. Due of this, the technique was restricted to the trader’s psychological or personal prejudices.
  As a result, since traders would only exercise with limited scenarios, the practice was pointless. Only after their funds had been exposed to the new scenario would they incorporate different scenarios.
• Paper trading was an extremely time-consuming activity because it required the use of actual physical materials. Paper trade involves preserving records, and maintaining folders over folders of outdated paper started to pose difficulties.

But as technology advanced, paper trading gradually shifted to a more computerized structure. This transition was incredibly advantageous.

Technology’s introduction to paper trading also made practicing with several asset classes more simpler. It would be challenging for one person to stay on top of all the subtle differences among the various assets that could be traded in. Trading with unfamiliar instruments was made possible by technology. Due to this exposure, traders were also able to become familiar with the new instruments.

In today’s market, paper trading is also referred to as virtual trading, trading using a demo account or with fake money, and, of course, paper trading. Although there are numerous names, the procedure is at least comparable.

Best Paper Trading Websites in India

TradingView

The majority of traders and investors sign up for a TradingView account because of its extra capabilities, like advanced charting. A virtual trading account is initially created with a balance of $100,000, which the user can then change as necessary. Since this currency is denominated in USD, Indian traders can select appropriate stocks.

Access to PowerX Optimizer is available through TradingView’s paper trading feature, which can assist users with prospective trades. Users can simultaneously open numerous charts in TradingView’s paper trading simulator. These characteristics place TradingView at the top of the list of the best websites for paper trading.

Neostox Trading

The Neostox virtual trading platform was created especially for the Indian market by Neostox, an Indian fintech company. Users have the option of practicing with virtual funds up to INR 1 crore, which may be utilized to trade in a variety of market areas, such as equities, FnO, and commodities. Users of the Neostox app receive real-time market information immediately, effectively imitating the experience of trading in the real world. A major boost for Neostox’s paper trading platform is provided by sophisticated tools like option and index analyzers. Users can also create reports in Neostox, which is different from other paper trading websites.

MoneyBhai

The Moneycontrol website offers a free virtual stock trading platform. Users of the site can trade in a variety of asset classes, including stocks, futures, options, commodities, and currencies. The MoneyBhai paper trading platform offers INR 1 crore in fictitious funds in the fictitious portfolio account, similar to Neostox. Different orders, including market orders, GTD orders, short sales, GTC orders, and square offs, can be made using this virtual currency. The platform’s lack of charting features, which makes technical analysis difficult to use, is a significant flaw. However, the platform’s other functions, such portfolio management, tracking, and trading conversation, are also well-liked.

ChartMantra

ChartMantra is one of the most well-known paper trading options and is supported by The Economic Times. Users can technically evaluate any stock using this tool. For use in the game, the trading simulator platform offers INR 1 lakh in the form of virtual money. The trading experience on ChartMantra comes close to being correct, and it even takes brokerage into account—an important expense that is frequently overlooked on other paper trading platforms.

Sensibull 

Although they operate in a very different manner from regular stocks, futures and options have become significant sectors of the stock market. As a result, paper trading options enables users to develop their expertise in this risky field. A good choice for option traders in this situation is Sensibull virtual trading.

Sensibull offers virtual money for paper trading, similar to the other options on this list, which can be used to develop and evaluate option strategies. It makes suggestions based on the user’s perspective of the market, and sophisticated users may access key data including greeks, payoffs, option chains, and breakeven analysis.

Zerodha

Another well-known name on certain lists of virtual trading platforms in India is Zerodha. Given that Zerodha is India’s largest stock broker, this is not surprising, yet, in contrast to popular assumption, paper trading is not permitted in the main account of Zerodha. Instead, the broker provides a separate platform called Streak that enables customers to backtest different trading techniques in addition to conducting virtual trading. The drawback is that customers must purchase a membership because this is a premium product.

The mock trading sessions that stock exchanges regularly host are accessible to regular Zerodha customers.

Conclusion

Paper Trading first served as a means of self-education on the ins and outs of trading, but as the method grew tiresome, it began to feel like a burden. The practice tool gained popularity with the public once more as technology was added to the equation.

Today, a variety of websites have transformed paper trading from a tedious arithmetic assignment into a gamified pastime.