What is Paper Trading?

Paper trading, also known as mock trading, is a simulated game that teaches how to trade investments. A learning game that takes many forms, paper trading includes simulated trading in stocks and bonds, mutual funds, and commodity futures. This type of trading exercise is usually found in classes that teach people about investing, including economics classes in high school and college, beginner stock trading seminars, or brokerage classes. Variations of the trading game are applied at various levels of education to offer students an interactive way to understand markets and trading.

A mock stock trading game can take several forms, depending on the type of investment traded and the age and education of the participants. Many investment information websites offer their own stock simulators designed to help visitors learn about the stock market. In classes, students record exchanges of fantasy stocks on paper and determine a winner when they tally up the results at the end of the game. Other investment trading simulations use computer programs to track securities prices and organize the game.

Though these trading games involve no actual money exchange, they do require participants to track the prices on the real-time market. As prices change, game participants make mock stock sales and purchases in an attempt to make the most money from the changing investment market. At the end of the game, the participant or team who made the most money on the stock market wins. Students playing a paper trading game to learn about investments often use the game to test out strategies taught in class.

Fantasy stock market exercises can provide an entertaining way to learn about investment trading. Paper trading is a beneficial learning tool because it allows students of investment trading to practice what they have learned about the stock market without facing any financial risk. Through a stock market game, students can apply learned principles in a hands-on way that can give them a new learning angle on trading stocks and bonds.

Paper trading offers just a small glimpse into the world of investment trading, and students should not expect exactly the same results when they go into the market to trade with real capital. Knowing market investments goes beyond becoming skilled at mock trading; responsible investing also means knowing the limits of the financial situation and when to draw the line on investment cash. Though paper trading offers a no-cost way to experiment with trading securities like stocks and bonds, students should also understand the risks, complications, and losses involved with real money investments.