For beginners, before starting real trading, it is recommended that you should prepare yourself first by spending some time to do paper trading. For those who may be unfamiliar with the term, paper trading is a trading simulation, where you can "buy" or "sell" a security with real price, but not using real money.

Simulations like paper trading force you to make decisions and then show you the consequences of those decisions again, without risking your capital. Paper trades are powerful because they teach through suspense and surprise. They demonstrate rather than tell. Instead of simply reading about trading, you experience it, making decisions about potential trades, and then watching those decisions play out.

• establish a track record
• develop trading discipline
• test trading strategies
• evaluate new markets
• build trader confidence
• make trading career decisions

Various companies and online trading simulation tools offer paper trading services, some free, others with charges, that allow investors to try out various strategies, or paper trading can be carried out simply by noting down fees and recording the value of investments over time.

Paper trading does not involve emotions, which is in fact one of crucial aspects in trading success. One can be very profitable in paper trading, but may lose money in real trading.