Paper Trading Platform is a software that offers life-like execution for equities, ETF, and options without any risks. Through this platform, you can start training the next generation of investors with the newest technologies in attracting new clients. Educators can also use this platform to set up an online trading simulator in just a matter of days to provide followers with the newest online trading tools. But how does this work?
Paper trading is a simulated market environment that allows participants to write down the buying and selling decisions. The process is simple because there is no need to place orders at a brokerage. New investors need to paper trade first until they learn the basic strategies. Experienced traders use a platform occasionally, especially as they work on new approaches and ideas.
What are The Key Limitations of a Paper Trading Platform?
Paper trading can affect the performance of an investor, especially if one hasn’t learned the key lessons. Below are the limitations of a paper trading platform.
• Market Correlation. Paper trading is unable to address the impact of broad markets on individual securities. A large chunk of equities moves at the same rate with major indices in periods of high correlation. This is common during the rise of the Market Volatility Index (VIX). Results may be good or bad on paper, but the broader conditions have made them, instead of the pitfalls or virtues of each position.
• Emotional Reality. Real-world emotions that are produced by profits or losses aren’t addressed by paper trading. That’s because, in the real world, a lot of traders cut profits short and then let losses run because they don’t have the market discipline. Self-destructive calculations aren’t present when working with hypothetical numbers.
• Formfitting. Traders choose their ideal entries and exits. This means they can miss the obstacles that the modern computer-driven environment generates. These levels of shakeout have become very apparent to participants in the real world who have watched technically-sound positions as algorithms shift to the predatory mode and look for their stops.
• Commissions and Slippage. There different types of hidden fees that real money traders pay from commissions and slippage. This is because of poorly capturing wide spreads in using a paper trading platform. For example, you may think you’re only paying $50 for a momentum stock, but in the real world, it’s $50.50 or more.
These are just the most common limitations when it comes to using a paper trading platform. Before you start paper trading, make sure you understand all these.
How Do You Benefit from Using a Paper Trading Platform?
Using a paper trading platform can help you reach new audiences to convert them into new clients.
With it, you get access to paper trading capabilities to teach investors how to arrange transactions between buyers and sellers. You also get to teach investors how to trade online and via mobile devices.
These aren’t the only benefits when you can get when using a paper trading platform. Through this platform, you can add more value to your current clients by teaching them new techniques and introducing new asset classes to them. You can also increase trading volumes, engagement, and client’s satisfaction when you introduce them to modern trading platforms.
Below are the key benefits of using a paper trading platform:
• No risks. Using a paper trading platform doesn’t cost anything. That means you’re not losing anything, whether you make vigorous decisions or not. This also allows you to observe the flaws in your analytical processes. From here, you can start to think of a strategy to avoid making those mistakes in real life.
• Using a paper trading platform allows you to practice. You, as a participant, can gain experience in all the elements of the trading process. From the pre-market preparation to the loss taking or final profit, you name it. When you access the platform, you’ll know how to use real-money software in a more relaxed environment. You wouldn’t have to worry about the keystrokes, as they won’t affect you.
• There’s no stress. Whenever you trade, you unconsciously conjure the twin emotions: fear and greed. These emotions can blind you and can cause you to make wrong decisions. Using a trading platform will bypass this. Thus, you can focus more on the mathematical process and not on the pitfalls.
• Paper trading can help you build statistics for a new approach. If you paper trade for a couple of weeks, or perhaps a month, then you can build statistics that are useful and create new strategies and market approach. You may be disappointed with the results at first. But in the end, you will benefit from it because it will require more data sets and paper trading.
• Paper trading can help you gain confidence. Once you know that you’re getting rewards from making complex decisions through paper trading, you’ll be more confident the more you keep doing it. That way, you can do the same thing when we’re already talking about real money.
How do You Choose a Paper Trading Platform?
Paper trading helps new investors by teaching them to be responsible for decision making, which involves taking risks. However, it doesn’t address the effects of the algorithmic strategies which targets the core of trading. Most new investors usually spend a particular amount of time paper trading their strategies and ideas before they can risk capital. Thus, they gain enough experience.
This exercise pays excellent dividends and shortens the learning curve. It allows the limited profitability earlier than the usual. To make sure you’ll get the most out of paper trading, you need to make sure you choose the best trading platform.
Below are the qualities of a trading platform you need to look for:
• Life-like Paper Trading Platform. When choosing a platform, one thing that you need to consider is the system. Does it provide a life-like platform? Is it similar to real-life paper trading? When we say Life-like, we’re talking about the following:
1. Equities and options
2. Spreads and ETFs
3. Streaming Level 1 and 2 quotes
4. Streaming charts with drawing tools
5. Real-time order execution
• Options Trading. A good trading platform must have options trading that you can choose from. These options may include multi-leg, which is a versatile option for a trading simulator. These features include:
1. Multi-Leg Options
2. Options Strategies and Spreads
3. OTO or OCO
• Customizable Trading Experience. As a trading participant, you need to consider the overall experience when you use the platform. How does it feel when you use the trading platform? When choosing the best platform, make sure you choose one that offers a customizable drag n drop interface, in order to create a unique experience to traders. Below are the features of a customizable trading experience:
1. Use multiple brands
2. Plug in 3rd party content and analytics
3. Localization (multi-language support)
4. Web-based and mobile applications (No installation needed, no downloads needed)
5. It supports any OS, including MacOS and Linux
• Broker Back Office. Also, when looking for a trading platform, make sure that it has a broker back office portal. Broker back office allows you to trade via a simulation. The trading rules, access, user permissions, trading websites, and compliance are all simulated.
1. Risk Management: pattern day trader, free riding, fat finger
2. Simulated Compliance: Buying power, margin requirements, and reg-t
3. Rules Engine: set up your own game rules or risks
4. Different Trading Account Support: Day tracker, margin, or cash
• Educational Tools and Gamification. Educators also utilize a paper trading platform to provide their followers with the newest trading tools. If you’re an educator, you should be able to make the process of becoming a stock trader more engaging. You can do so by introducing online trading competitions and contests. You can reward top performers in paper trading. Your platform should be able to do these:
1. Determine who the top performers are
2. Real-time performance tracking
3. Organize competitions and contests with just a click of a mouse
4. Track Profits and Losses
• Websocket and API. One of the best features of a trading platform is being able to access the leading API for managing the trade life cycle. Having access to the API also gives you access to extract the trading data as well as building innovative applications for trading. These applications include:
1. Rest API
2. Track or collect trading data via API for business intelligence
3. Test trading algorithms via API
4. Customer Widget Designer Module
Whether your firm is looking at upgrading stock trading platform, ETNA stock trading platform is the best choice. ETNA offers modern stock trading platform as a service to investors and aspiring investors. It offers innovative pricing plans as well as customization opportunities.
It also offers convenient usage-based pricing to convert the client-vendor relationship into a partnership that benefits each other. This makes ETNA stand out from its competition. What are you waiting for? Contact ETNA now for more information and how to get a paper trading platform.