No, it’s not the same as trading real money, but paper-trading exists for a reason. Whether you are just beginning to trade or you are an industry veteran who wants to test a new strategy, paper-trading lets you work out any kinks in your system before laying any money on the line.
Additionally, if you just switched platforms, Kinahan suggests paper-trading first if for no other reason than to learn the mechanics of the new platform. He lists a number of questions you should resolve while paper-trading before making an actual trade: “How do I place the trade on this platform? What am I looking at when I place this trade?”
Of course, Kinahan is realistic about what paper-trading can teach you, as well. “If you have success in paper-trading it does not mean you will have success in real life — they’re different because there’s no emotional component in paper-trading,” he says. Nonetheless, it serves a purpose.
Onward and upward
Every trader has something he or she can work on to improve. We presented just five possible resolutions for you as we head into 2013, but if you feel you have a good grip on each of these, that doesn’t mean there isn’t another area in which you could use improvement. Whatever your trading resolution, just don’t be part of the 30% of people who make a New Year’s resolution and break it within the first two weeks.