How to do Paper Trading in Share Market

There are many people who look at Share market with fascination. By comparing the values of a stock at two different time period, people come to a conclusion that the market is always on the rise and it is a goldmine, where money can be minted and so on. These people are completely unaware of the underlying risks involved in the stock market. Certainly market is a place where money can be made. The new comers almost fail to notice the downside of the market. How the new entrants can understand the market behavior and learn the trade. How this can be achieved in a safe way? This is where paper trading comes in.

This is one of the safest ways to learn the market without any cost, because there is no money involved. Everything what is required is the ‘Investor’ should have strategy in place. Why? Without a strategy one cannot bluntly do paper trading. The aim of the this trading method  is to learn the market. He should make up his mind on when he is going to buy and under what conditions he is going to sell. Secondly he should select the shares he is going to deal with. He should identify shares that are in the news and learn to avoid them. For a beginner, the price movement of this kind of shares is difficult to understand and trade them. Effort must be put in to find shares that have sufficient liquidity, which means, it is traded in large volume. Well, these are the basics a beginner should know.

In paper trading a proper record is maintained in a note book. When he buys it recorded in detail. (Complete with date, number of shares and price). When the stock is sold, it is also recorded along with the profit made. What is important is losses too will have to be recorded so that the investor gets a familiar picture of the market. The investor can judge himself and the strategy that is being employed. He can try alternate methods and finally to settle on a course of action. He can also identify the right kind of stocks to trade.

This method cannot give the feel of real time market trading. Real trading and paper trading are not the same. In real time trading the trader has to override emotions, greed and fear. These are factors that need considerable experience to adjust. This method of trading cannot be ruled out as a trading game. Paper trading gives the trader the jump start to the market. It makes the trader get himself involved. 

If genuine effort is put in paper trading it can give the trader a true experience which will help him later in real time trading. Every new comer should do paper trading until he feels that he is ready for the real market. It may even take several months for a trader to achieve this status depending on the learning curve of the new comer.  But the outcome will be he will be in a better position to trade in the real time market with ease and comfortably.