How to Paper Trade Stocks
Paper trading stocks is relatively easy and has no requirements. You do not need a licensed broker to buy and sell the stocks for you. Paper trading is virtual trading. No stocks are exchanged, and no money is lost or gained. Paper trading is a way to evaluate a trading strategy without risking any money. Many investors use paper trading to assess various trading techniques before implementing them.
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Instructions
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Open a paper trading account. There are numerous free virtual stock exchanges. Search "virtual stock exchange" to find a list of free exchanges. These virtual stock exchanges provide free paper trading accounts. Many brokers offer free paper trading accounts as well. The paper trading accounts are not linked to any cash accounts. Think Or Swim and Wall Street Survivor are examples of websites that offer free virtual stock exchanges and free paper trading accounts.
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Select "create new account" or "register" to create a paper trading account. Provide the required information, such as name, address and date of birth. Although this information is not monitored, fill out the information correctly, because some virtual stock exchanges offer prizes to the top traders.
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Research stocks you would like to trade. There are numerous free financial websites that provide free stock charts and company reports. Analyze the stock charts, look for areas of resistance and the general trend of the stock. Areas of resistance are price levels that the stock has been unable to go above or below. For example, if a stock is unable to go above $5 over a period of time, then $5 is a key price barrier. If a stock does not to go below $3, then $3 is a key price barrier. If a stock breaks through that barrier, it is likely to continue in that direction, according to the Learning Stock Option Trading website.
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Decide how you want to trade the stock. There are two main trading strategies: long and short. Long is the classic way of investing and involves buying and selling a stock and hoping the stock increases in value between the time you buy and sell it. Short selling is achieved by borrowing shares from your broker to sell, then buying the shares back to reimburse your broker. Short selling a stock means you are speculating the stock will decline, allowing you to buy it back at a cheaper price.
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Log into your online paper trading account. Click "trade" and type in the symbol of the stock you want to trade. Select the number of shares you want to trade and click "buy" or "short".
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Evaluate your trading success by examining the net gain or loss from each stock transaction. Click on "trades" or "account history" to observe your stock transactions. Compare the net percentage change of your paper portfolio with the net percentage change of the major stock exchanges, such as the National Association of Securities Dealers Automated Quotation System (NASDAQ) and New York Stock Exchange (NYSE). If the net percentage change of your stock portfolio is better than the major stock exchanges, your trading strategy apparently is effective. Four weeks generally is adequate time to determine whether a strategy is working, according to the Trade Profitability website.
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References
- Photo Credit stock chart with a pencil mark image by Dmitriy Lesnyak from Fotolia.com
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Comments
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Most of my friends ask me why I am able to travel around the world while they work 8 to 18 five or six days a week without saving as much. My respond have been simple. Work for yourself and not for others. Online trading have liberated me from working for others.
