Funny money – paper trading
This week I setup a couple of dummy/paper trading accounts. Can’t afford to risk the real spondoolies just yet. Paper trading or “virtual stock trading” as I have also seen it called is perfect for the virgin trader, it gives you the chance to test out the markets, pick some stock, do some research, play with stop losses, all without risking any real money.
Just like monopoly really, except instead of buying property you’re investing in stock. Paper accounts are easy to setup and behave just like a real live trading account. A practice/paper account is an easy, risk-free way to improve your investment skills. Usually online paper accounts give you:
- A start up fund, say £10,000 of fantasy money so you can practice playing the market
- Functionality that’s designed to work as closely as possible to a real share dealing account, not just a watch list.
- Access to tips and advice to help you get started and improve your investment skills
- Free research tools so you can learn more about the market
A paper account lets you:
- Pick stocks, buy and sell within your paper account based on current market prices
- Check out different strategies and considerations
- Set up and try stop-loss and tracking stop-loss limits to see how they work
- Set up watch lists
There are plenty of online brokers offering paper accounts and usually for free. If it is not for free find one that is.
I have setup paper account with www.share.co.uk. This was real easy no complicated forms to fill in and the user interface is very intuitive. I also set up a paper account via the FT (Financial Times) this is great and I would definitely recommend it to any virgin trader.
Here is how to set one up. Go to:
http://www.ft.com/sitemap
Then scroll down the page and select ‘portfolio’ from the ’services and tools’ section. From there you will be asked to register (it is free) and the rest in pretty simple really.
v
Good start.
I would also say to remember to treat your dummy account exactly like the real thing. Set a profit target. Set a stop, remember to add any broker coms into it as well.
Also find out any likely slippage and how that will affect the equation. Slippage is very important.
Max
Max,
I hear what your saying.
I’ve just been reading a bit about slippage. I don’t really understand it completely yet like a lot if things to do with the markets. I know it is to do with the difference between the price at the time you place an order and the actual time your broker completes the order.
Does the virgin have any control over that?
v
I think one of the things you should do is to write down your strategy. That way you articulate the influences you are going to allow to influence your investment decisions and the sectors and shares in which you plan to invest. It is for your benefit that you spell things out. It is also useful when you read again what you have written to see how closely you adhered to your strategy and whether things would have been different if you had – it would be a matter of learning from your mistakes.
The Trader