The imaginary money of paper trading is sometimes also called "paper money," "virtual money," and " Monopoly money." Various companies and online trading simulation tools offer paper trading services, some free, others with charges, that allow investors to try out various strategies (some stock brokerage firms allow 14-day 'demo accounts'), or paper trading can be carried out simply by noting down fees and recording the value of investments over time. Investors can test these strategies with paper trading to avoid taking on excessive risk due to inexperience. Successful execution and profit generation from these strategies usually require high levels of technical knowledge. Other advanced strategies include leverage, short-selling, forex and derivatives trading. With a paper trading account, an investor can set up a bull credit spread and a bull debit spread simultaneously and watch how the payoff for each position changes as the market moves. A textbook may state that writing a covered call is synthetically the same as writing a naked put, but in practice there are subtle differences. Stock market games are often used for educational purposes.įor example, investors can create several different positions simultaneously to compare the performance and payoff characteristics between multiple strategies. Investors also use paper trading to test new and different investment strategies. This is accomplished by the manipulation of simulated money and investment positions that behave in a manner similar to the real markets. Paper trading, sometimes also called "virtual stock trading", is a simulated trading process in which would-be investors can practice investing without committing money. JSTOR ( October 2021) ( Learn how and when to remove this template message)Ī stock market simulator is computer software that reproduces behavior and features of a stock market, so that a user may practice trading stocks without financial risk.Unsourced material may be challenged and removed.įind sources: "Stock market simulator" – news Please help improve this article by adding citations to reliable sources. This article needs additional citations for verification.
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