Why you need to start Paper Trading NOW in 2019 (Stock Trading for Beginners)


Hey guys, and thank you for watching Smart
Money Minds. In today’s episode, we’re going to be talking
about paper trading. What the heck is paper trading? I know stock trading, but how am I going to
do some trading of paper? I guess I’ll trade you two purple paper for
one green paper. Fair trade? No, that’s not what paper trading is. Paper trading means fake stock trading. In other words, it’s practicing your stock
trading and investing. The stock market has been around for many,
many, many years and it’s been around for such a long time it’s best to start taking
charge of your finances and instead of giving it to some random finance guy who’s gonna
look after your money for you and are going to take a four percent fee on your five percent
return on investment. The biggest reason to paper trade is to really
start understanding how to invest your money into the real market. The stock market is this giant, big thing
that not everybody understands. The easiest way to get to know it is to practice
within it. What you do is you just start trading and
investing with fake money. The platform that I use called Trading View
allows you to start practicing and it offers this service. When you click into tradingview.com this comes
up and all you have to do is join for free and create an account with this platform. Once you join the account, all you have to
do is click onto the charts, which is highlighted here. Once you get into some of the charts, you
can pick any chart that you like. Right now I have Beyond Meats, which is a
very hot stock at this moment. You see here where the yellow box is it says
paper trading. At the bottom area there, paper trading. What you want to do is, once you look in,
you can paper trade. These are the tabs for paper trading. You got positions, orders, history. It’s just like a regular broker where you’re
setting your orders, you’ve got your history, you have account summary. If you look here where there’s buy and sell,
you can press into it and it gives you all the orders that you are allowed to have, which
is market, limit and stop orders. You can participate and make fake trades. You see here, that’s buy and this is the sell
part. It allows you to buy and sell whatever shares
that you’re looking for. With this information, you can buy, sell and
set limit orders and stop orders according to real time information. Don’t forget that if you’re only planning
to trade with $10,000 or $20,000 you can always go to this screen here where … the settings
and you can press reset paper trading account. With this, you can set what amount, what balance,
you want to start with so it reflects on your real life account that you want to practice
on. You’re not going to buy 10,000 stocks of Apple
if you weren’t going have that much money to buy it in the first place. There are plenty of benefits to paper trading
and, in my experience, I find there are two main ones. Number one is that it’s risk free. They are not using your real hard earned money
to practice in the stock market and yet you’re using the real information that the market
is generating. You don’t have to stress out over having your
money locked in over night or stress out over losing real money, ’cause that could be extremely
painful. Second main point I find for paper trading
is for strategy testing and perfecting. You can use paper trading when trying to develop
your new rules or guidelines for trading, or if you’re trying something else new. For example, if you’re trying to play something
that’s higher risk or you’re looking for a counter trend bounce for example, and that’s
something you’ve never played before, then you can practice and see how the market reacts
and see if your play works out as planned. You can try this 10 times, 50 times, a hundred
times, a thousand times, and it doesn’t matter because you’re not using real money. You can use the statistics and see, “Oh, maybe
out of 50 times I got 40 times that it went as planned.” That gives you a good probability of your
play working out. You can think of paper trading as having a
scrimmage in sports. The score doesn’t really matter that much. You can try out some new moves. You can fail. You can fall on your face. There’s no one really to judge you. No one’s out there to try to injury each other. Everyone’s just playing for fun. However, this is the difference between paper
trading and real life money trading, because a scrimmage and a real game is very different
where there are stakes on the line, tensions are high, people are trying to win. One major difference between paper trading
and real life money trading is the stock fill. For example, if you want to buy a hundred
shares of something for $10 let’s say if you’re paper trading, if that stock hits $10, then
you will automatically fill with a hundred imaginary shares. However, in the real life, in the real world,
someone might only be willing to share or willing to sell 40 shares at $10. You might get a partial fill, so you only
bought 40 shares from this other person and you will have to wait for another person maybe
willing to sell 60 shares at $10 in order to get your full a hundred shares that you
wanted to buy. This is especially important because it comes
down to two terms, called liquidity and slippage. Liquidity is determined by the amount of shares
being traded, which is represented as volume. If a lot of shares are being traded, then
the game is very liquid. As the shares are being exchanged constantly
and rapidly, this will lead to less spread between a buy and sell price. That means maybe someone will buy at $10 and
someone is willing to sell at $9.99. For example, let’s say you’re willing to sell
a hundred shares at $10 for a very illiquid stock. Then, at this point, maybe only one person
would want to buy 50 shares at $10. Let’s say the next person is only willing
to pay $9.90 to buy another 50 shares of your … of that stock. Maybe at that point you’ll feel like, “Okay,
I have to lower my price to $9.90 to sell the rest of it.” Therefore, you average out to $9.95. In order to look at how liquid a stock is,
we’re going to look at a couple examples. Let’s look at Apple right now. You see how there’s 30 million shares being
traded in one day versus let’s look at a name like CVSI here. It’s only got almost 400,000 shares being
traded. The higher the volume that’s being traded,
the more liquid the name is and the easier you’ll get your fills for your names. Even with these fundamental differences between
paper trading and real money trading, by using paper trading to practice your trading methods,
your technical analysis and applying your knowledge, you’ll be light years ahead when
you’re actually start using real money to invest in the markets. Think about gambling. If you wanted to learn how to play blackjack
or poker, the worst way to go is to use real money, go to the casino and try your luck
because that’s a sure way to lose all your money. If, let’s say, you had some practice on some
online poker or blackjack and you just played for fun, you’ll be able to understand the
mechanics and you’ll be able to look for what you’re … what the winning hands are and
your probability of winning with certain hands as well. Paper trading is exactly the same concept
but applied to investing. Lastly, I’ll put a link below for Trading
View, and that’s where I do my paper trading. You can start a free account and you can start
paper trading today. Last but not least, in the comment section
below, let me know if you’ve paper traded before. What are your thoughts on paper trading? I’d like to hear more of your comments and
what you think about it. Make sure you subscribe, like my video, and
make sure you hit that notification button and then we’ll see you next time.

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