Paper Trading – A Risk-Free Approach on Wall Street:
Trading stocks inherently involves a certain degree of risk, so is it possible to trade risk-free as you learn? Yes, it is. This approach is widely known as paper trading. Essentially, you receive access to a demo account that allows you to learn, practice, and gain experience with your chosen strategies through the use of “paper” or “pretend” funds. Your real money portfolio is not at stake. A couple popular platforms for this virtual trading process are TD Ameritrade’s paperMoney and Investopedia’s Stock Simulator.
Paper trading is an opportunistic mechanism for would-be traders, as well as seasoned professionals looking to implement new strategies, because it helps them work through the “learning phase” without taking unnecessary hits to their portfolio. One of the most common mistakes employed by beginners is entering the market too early, before they have the knowledge and experience required to profit on a consistent basis. So why not prove whether or not a particular strategy can work for you through paper trading first? In the end, rushing into the market just to be “part of the action” before verifying that a particular approach will work for you is foolish and can be avoided.
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