Why Paper Trading Doesn’t Work
The better approach is not to trade with virtual money, but to start small with real money
People often say paper trading is a good way to “practice” trading. We believe it isn’t.
It teaches you exactly nothing about the real game because the real game starts the moment your own money is at risk.
Paper Trading Removes the Single Most Important Variable: Stress
Fear of loss
Impulse to “get it back”
Hesitating at the worst moments
Cutting winners early
Adding to losers
Abandoning plans mid-trade
None of these psychological failures show up in paper trading.
Why?
Because the brain doesn’t activate its threat circuitry when nothing is at stake.
You can’t simulate fear.
You can’t simulate greed.
The Only Positive of Paper Trading
Paper trading will show you the mechanics of trading. For example, it’ll help you learn the interface of your brokerage’s platform, understand how orders fill, etc… It basically teaches you where the buttons are. But that’s where its usefulness ends. Everything that makes or breaks a trader (fear, patience, conviction, restraint, emotional control) only shows up when your money is exposed.
The Solution: Start Small, Start Real
The better approach is not to trade with virtual money, but to start small with real money.
Open a live account with the smallest size possible (e.g., $500 or $1,000).
Trade with the absolute minimum unit size (e.g., one share or one lot).
The actual profit or loss will be negligible, but the mere fact that the money is real is enough to trigger the necessary emotional responses.
The bottom line is simple: You don’t learn how to swim by practicing the strokes on land; you need to get into the water.