Paper Trading

Written by Michael Federico
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Most teenagers actually go through the most basic paper trading lesson in high school economics. Students are prompted to pick a number of stocks out of the newspaper and watch their progress over a certain period of time, recording price shifts on a daily basis. They can choose these stocks based on any system they want. The majority end up picking companies that sell products they like. While amateurish, this is actually a system that is employed by many professional brokers.

The point of the school exercise and paper trading in general is to allow a person to see how the stock market works without ever having to risk money. This can help a person develop confidence in his ability to make money on the market. It can also introduce him to basic market features like an uptrend or downtrend.

Modern Day Paper Trading

Serious paper trading is a bit more comprehensive than the high school version. A person should use paper trading as part of an overall instructional program. Many services will teach people how the market works. They will demonstrate different types of trades and break down each market. They will discuss a variety of strategies and even give people a chance to try out a variety of systems.

Before the training service cuts a person loose, they will allow him to paper trade alongside professional brokers. This lets a novice trader see what works for him and what doesn't, and it shows him that anyone can make successful trades if they do the work. Close paper (or electronic) records are kept, so the trainee can see every decision he made laid out before him.

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