Smart position sizing & risk management

Back to glossary
Trading Strategies

Paper Trading

Simulated trading with fake money to practice strategies without financial risk.

What is Paper Trading?

Paper trading (or simulated trading) lets you practice trading strategies using virtual money in a simulated market environment. Most major brokers offer paper trading accounts.

Benefits

  • Learn without risk: test strategies before risking real capital
  • Platform familiarity: learn order types, hotkeys, and tools
  • Strategy development: validate your edge with data before going live

Limitations

Paper trading doesn't replicate the emotional pressure of real money. Fills are often more generous than real markets. Use it for learning mechanics, but understand that live trading feels completely different.

Related Terms

PDT Rule

FINRA's former Pattern Day Trader rule required a $25,000 minimum for active day trading. Overhauled April 2026: the $25K floor is gone, replaced by a $2,000 margin minimum and real-time intraday margin.