The easiest way to learn trading is to begin by doing Paper Trading. So what exactly is Paper Trading? Paper Trading derives it’s name from the way things used to be done. Long ago, at a time not too distant in the past, stocks used to be traded “ on paper”. That is, to buy a Stock, you write down the name and the Symbol, known as Stock “Ticker” on a Piece of Paper and then give it to your Broker, who then would buy the Stock for you.
To understand, a stock symbol is simply a set of unique letters assigned to a Publicly traded company. The symbol is unique to that company and that company only. Here are some examples; JUMIA Technologies, is traded under the symbol, JMIA. UPSTART Holdings Inc, trades as UPST. Microsoft Corporation, trades under MSFT. GOOGLE trades as GOOG. So as you can see, these are easier to remember.
What then is Paper Trading?
Assume you want to buy 10 shares of Microsoft, 10 Shares of Google, 10 shares of Jumia, you can simply write down on paper:- Old way of doing it.
• 10 Msft
• 10 Goog
• 10 Jmia
Your Broker will understand what this means and buy them for you. But these days, nobody does this because there are many FREE apps to do this for you to make your life easy.
So Why Paper Trade?
To buy a real Stock, you have to spend real money. Starting with real money as an amateur, you CAN LOSE all your money. So the Objective of Paper Trading to allow you to Test your Stock Picking Skills BEFORE committing REAL MONEY and to build confidence.
How to Paper Trade:
To Paper Trade, you begin by picking Stocks of companies you believe would make you money or Stocks of companies you believe have a potential to make you money. You then PRETEND, you are BUYING and SELLING them over and over or over a specified period of time. Depending on what your criteria is, at the end of the period, you then see what the value of your Imaginary Portfolio. So if you made money, you know if you were using real money, you also would have done same. If you lost money, same would also be the case.
Let’s say you have 5000 you want you invest. On October 1, you “BUY” (Imaginary) 10 Shares of Microsoft, 20 Shares of Jumia, 5 Shares of Google, you write this down ON PAPER or APP that you are using to Track it.
Say you set a 30 Days holding or Trading Period. Suppose on October 10, you check, and notice that the value of the Stocks you bought are now worth 6000. Since you started out investing 5000, you then “SELL” (Imaginary)., again, you write this down on paper. You repeat this over and over. At the end of your investment period, you sell everything. Anything over the initial 5000, is PROFIT anything below, is a LOSS
• To Paper Trade, select some STOCKS you Like.
• Pretend to BUY and SELL them.
• Track and follow the price Movement.