What is Paper trading?
Demo savdo
In short
Practising with a virtual account at real market prices, without risking real money.
Also known as: demo, paper
Paper trading means practising with a virtual account at real market prices, without using real money. Placing orders, setting a stop-loss and a target, working out position size — everything works as in real trading, except the result doesn't touch your money. On limitup, demo trading comes with a $10,000 virtual balance.
Why use it
- Learn the platform and order types without costly mistakes.
- Test a strategy without risking money and get a rough idea of its expectancy.
- Build discipline habits: a plan before every trade, a journal entry after it.
Limitations
The biggest weakness of paper trading is psychology. Losing a virtual $500 doesn't hurt like losing a real $500, so fear and greed are never really tested. Demo fills are also often idealised: real-market slippage, liquidity and gaps are not fully reflected.
How to use it well
Treat the demo account as if it were close to the size of your real account and trade with the same rules. Review the results after at least several dozen trades. When you switch to real money, start small.
12 wins × +$40, 18 losses × −$20 = +$120. Add $2 of commission and slippage per trade and the result halves: +$60.
The same 30 demo trades. The first 5 showed 80%, but the true rate was 40% — it only settled after 20–30 trades.
Example
For example: a $10,000 virtual account, 1% risk per trade ($100), 30 trades:
- 12 wins, average +$210 → total +$2,520.
- 18 losses, average −$100 → total −$1,800.
- Result: $2,520 − $1,800 = +$720 (+7.2%), win rate 40%.
That's a decent start, but before going live, recalculate with $0.05 of slippage on every exit plus commissions. And for your first real trades, cut risk to, say, 0.5%.
Mistakes and tips
Don't take positions in demo that are far larger than your real account allows — otherwise the habits you build won't transfer.
Log every demo trade in your journal too: that is where the data for your conclusions comes from.
Don't start with a large real amount after a few lucky demo trades — test your psychology with small size first.
Frequently asked questions
- How long should I paper trade?
- The number of trades matters more than time: at least 30–50 planned trades with a positive result. Even then, move to real money with small size.
- If I make money paper trading, will I make money with real money?
- There is no guarantee. Emotions, slippage and fills are different with real money, so results are usually worse than in demo.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
Try the theory without risk
Open a free account: demo trading with a $10,000 virtual balance, a trading journal, calculators and a step-by-step course.