Day trading is a very competitive profession where the best of the best can make incredible amounts of money. While there are as many approaches to day trading as there are day traders, all successful day traders started with one simple formula: take an online day trading course, practice with paper trading, and then start trading for real.

So what is paper trading and why is it so important?

Paper Trading Explained

Paper trading is the use of trading software to make trades in a simulated real-time environment. Almost all contemporary trading platforms will offer some form of paper trading that simulates the real experience of trading with their software either exactly or nearly so.

These paper trading accounts allow you to trade exactly as if it were the real thing, but with paper money and with the parameters of the account set by you. This is a huge advantage over traders who came before this major benefit because just like a fine tuned athlete, traders need to practice their skills before meeting the competition.

The Importance of Paper Trading

While starting off with an online course is essential to a successful day trading career, the next necessary step is to spend the time and effort to test your skills and ideas in a real-time environment. Theory is great, but nothing can prepare you for the act of actually buying and selling except the simulated environment of a paper trading account.

Paper trading will allow you to see how your ideas and skills actually play out when confronted by the nuance, complexity and stress of making live trading decisions.

How to Make the Most of Your Paper Trading Experience

Simply diving right into a paper trading account has a lot of value on its own, but paper trading experience is far more valuable when coupled with a robust system of analyzing your trades, both the winners and the losers.

For each trade that you make, you should know precisely why you entered and exited the trade, and what you could have done better to maximize profits and minimize risks. Successful day traders will keep a log for each trade so that they can review their notes to discover valuable patterns in their trading that provide insight into how they can do better in the future.

Getting Ready for the Real Thing

Nothing compares to the challenge and exhilaration of live trading, and many day traders are both excited and intimidated at the prospect of starting to trade using a live account.

Your paper trading account is the best way to gauge your preparedness for the real thing. Once you have a solid trading strategy or strategies and have established a comfortable trading routine, it will seem almost inconsequential as you switch from paper trading to a live account.

While there will be some inevitable tension at first as you gain control of the emotions with trading real money, the skills you learned paper trading will put you in a better position to be successful and any stress and nervousness will soon fade.

Your paper trading account is an absolutely essential step on the way to becoming a successful day trader, so take the time to make the most of it.