If you’ve ever asked yourself “what is paper money trading?” you’re already on the right path as a trader, as paper trading is a key weapon in the arsenal of many savvy investors.

The concept of paper trading gets its name from the old practice of tracking hypothetical trades and measuring their performance over time with pencil and paper. Years ago, traders did this to test new strategies and learn the fundamentals of trading.

Today, paper trading is far easier, because it’s gone digital. Traders simply use their preferred trading platform to trade with virtual accounts funded with simulated money.This means tracking performance is automated, and traders can use many of the same trading tools for virtual accounts as they do for conventional “real money” accounts.

With that in mind, let’s take a closer look at why paper trading futures – or any other asset – makes sense and how to get started in the optimal manner.

What is Futures Paper Trading?

When paper trading, you can open practice accounts that simulate real accounts by allowing you to trade futures, options and stocks with virtual money.

Traders can construct a portfolio and begin trading assets (futures, options, stocks etc.) in near real time under the same basic market conditions that apply with any conventional account. Often paper traders take advantage of the same tools (charts, algorithms etc.) that are available for conventional trading to improve their performance.

In other words, paper trading is a near-identical replica of real trading, powered by technology.

What Are the Benefits of Simulating Futures Trades?

Paper trading allows people to trade without putting real money at risk. Novice traders can use this opportunity to explore the basics of trading and test their tactics and strategies without assuming any risk. More experienced traders can still benefit from simulating trades because it gives them the time they require to become familiar with the specific features of a new trading platform.

Now, let’s learn how to set up a paper trading account.

How to Paper Trade Futures

Many major trading platforms offer demo accounts that allow you to trade using a demonstration (or “demo”) account. These accounts work just like traditional accounts, except they are funded by the trading platform with virtual dollars for you to trade.

After you sign up, you can then make trades and track your performance over time as your virtual portfolio balance rises and falls, just like a conventional balance.

The easiest way to begin futures paper trading is by creating a demo account at RJO. This allows you to place orders, track orders and positions and monitor market activity, all without any risk.

Tips for Paper Trading Futures

To optimize your chance at success, it’s important to approach paper trading seriously. While the gains and losses may be simulated, the experience you gather can make a critical difference when you begin trading real money.

With that in mind, consider doing the following:

  • Keep an accurate record of all of your paper trades
  • Ensure trades extend along a sufficiently long time horizon to allow you to derive actionable insights into how various strategies perform
  • Test a wide variety of strategies to see how they perform. Not every strategy is right for every market. Some are best suited for bull markets, others perform better in bear markets etc.
  • Don’t view paper trading as a one-time training session. Many of the best traders use simulated accounts alongside their conventional accounts to test new trading strategies or fine-tune existing strategies. It’s very likely you can profit from ongoing paper-based trading activity.
  • Recognize that paper trading is inherently less stressful than normal trading. Because there is no risk, traders are much less likely to fall into some of the traps that exist with money accounts (chasing losses, emotional responses etc.).
  • In that same vein, understand that the absence of risk can make you more aggressive than you would normally be. By weighing these factors, you can paper trade under realistic psychological conditions, as well as real market conditions.
  • Additionally, be aware that paper trading does not have the fees that are often associated with actual trades. While this may not be a significant financial difference, it is worth bearing in mind.

Practice Makes Perfect

You’ve probably heard these maxims: “Practice Makes Perfect,” or “Repetition is the Mother of Skill,” or” Experience is the Best Teacher.”

These statements have endured for generations for a reason. If you want to learn and improve, practicing is essential. It also helps you avoid the early mistakes that often prove so costly to investors.

Paper trading is the ideal way to learn what works best and which strategies to avoid. It can help you gain a critical competitive edge in a realm that can be unforgiving to those who are unprepared.

Your RJO Futures Demo Account

As we stated above, there is no better way to get acquainted with the value of paper trading than opening a new RJO Futures Demo Account.

Benefits of this account include the following:

  • Free futures paper trading ($100,000 in simulated funds)
  • Live market data and execution
  • One click trading from charts, price ladder (DOM) & order ticket screens
  • Cancel/replace orders without typing
  • OCO orders with GTC capability
  • Alerts based on price, study, or time can trigger order placement
  • Options window with options calculator and ‘what if’ scenarios
  • DOM Trader (price ladder)
  • Major chart studies – moving averages, volume & open interest, RSI, Oscillator, DMI, etc.

We hope you’ve enjoyed this guide for futures trading. RJO’s demo trading tools are some of the market’s most sophisticated, yet also extremely straightforward to use.

You can request access to a new RJO demo account by following this link.