Paper trading offers a risk-free way for beginners to learn to trade or for advanced traders to try out new strategies. However, in order to paper trading to be effective, it’s essential to have a paper trading platform that mimics the dynamics of live trading accounts.

With that in mind, let’s take a closer look at what to consider when choosing the best paper trading platform. We’ll also highlight three of our favorite paper trading services to help you get started.

What is Paper Trading?

Paper trading, or simulated trading, allows investors to place trades in a simulator account so that there is no actual risk or money changing hands. The name “paper trading” comes from the old practice of recording trades by hand to determine their profit or loss. Today, most paper trading platforms work just like a live brokerage account and automatically track your simulated portfolio for you.

Why Use a Paper Trading Platform?

Paper trading has several purposes. Simulators are highly popular among beginning traders because it allows them to learn the basics of placing orders and planning out strategy in a risk-free environment. The only downside in this case is that traders need to have the same mindset of risk tolerance in the simulator that they would bring to a live trading account.

Experiences traders can also make use of paper trading platforms. In particular, simulated trading is a great way to test out and refine a new trading strategy. Alternatively, paper trading can be used to practice with profiting under different market conditions or to safely try out options trading.

What to Look for in a Paper Trading Platform?

To be effective paper trading should be as similar to live trading as possible. For that reason, the main things to look for in the best paper trading platform are the same advanced features that many of the best charting and brokerage services offer.

Order Flexibility

The first thing you need out of a paper trading platform is order flexibility. You can place limit, stop-loss, and other conditional orders with a live trading account, so you should be able to place them in your simulator as well. On top of that, some of the best paper trading platforms allow you to automate orders based on technical patterns and custom defined triggers.

Importantly, not all simulators give you access to place simulated trades across the entire market. If you’re interested in simulating trades for stocks outside of the major exchanges, you’ll need to do some research to find simulators that support those tickers. In addition, if you want to use a simulator to practice options trading or test out an options strategy, make sure you have access to place paper options trades. 

Portfolio Tracking

Paper trading used to require that you track your returns and performance by hand, but most modern simulators give you access to the same portfolio tracking tools as live brokerage accounts. Some paper trading platforms go even further, allowing you to break down your trades to see where you succeeded and where you may have made more questionable decisions. Look for these reporting tools particularly if you are trying out a new trading strategy.

Trading Tools

What really distinguishes paper trading platforms is the suite of tools they each put at your disposal. There’s a lot to look for here.

To start, consider whether your simulator offers mechanisms for discovering potential stocks and trading opportunities. Is there a stock news feed, a watchlist function, or an advanced stock scanner? While you can turn to outside tools for these purposes, it’s definitely advantageous to have them wrapped into your paper trading platform.

In addition, look for technical charting tools or fundamental analysis tools that are specific to your chosen trading strategy. If you’re using a simulator to try out a new trading strategy, having the option to define an automated execution (for example, via a coding language) is extremely helpful.

Pricing

There are a ton of free paper trading platforms available. However, many of the more advanced services require you to pay for real-time data, if not for the simulator itself. Data costs vary depending on what market information you need, but live trading data typically starts around $100 per month.

Note that some free services do require you to sign up for an account with a brokerage, and potentially even to fund an account. This is okay if you plan to move into live trading in the near future and would stick with that brokerage. Otherwise, you may want to look elsewhere for a trading simulator.

Our 3 Favorite Paper Trading Platforms

With all that in mind, let’s take a look at three paper trading platforms that we think have a lot to offer beginners and experts alike.

ThinkorSwim

TD Ameritrade offers paperMoney, a paper trading service that offers simulation within the popular ThinkorSwim trading platform. You do need to register for a TD Ameritrade account to use this service, but you don’t have to fund the account or pay any data fees.

ThinkorSwim is a highly capable technical trading platform. It offers a custom coding language, which makes it perfect for establishing custom scans and defining trading strategies based on technical charting patterns. In addition, ThinkorSwim allows you to set up trading alerts based on technical patterns for any stocks in a scan result list or in a watchlist.

Almost all of ThinkorSwim’s features are enabled in simulator mode and you can track your portfolio through paperMoney. However, it is not built as a simulator from the ground-up, so there is little in the way of reporting on how your trades performed other than return tracking. 

ThinkOrSwim Active Trader

Active Trader screen with Heiken Ashi and Market Depth

DASTrader

DASTrader is another advanced charting and live trading platform with a built-in simulator option. This simulator is best for advanced traders who want to practice with direct market access. DASTrader’s paper trading allows you to rout orders through more than 50 different market makers and offers the option to purchase Level 2 market data. Plus, it offers multiple types of stop orders, options chain data from OPRA, and multi-account management features.

However, DASTrader falls short when it comes to technical charting features. It lacks many of the technical indicators and drawing tools found in ThinkorSwim, and doesn’t have a custom coding language to use for defining automated strategy execution or advanced scans.

DASTrader doesn’t require a brokerage account, but you do have to pay for exchange data on a monthly basis. NASDAQ Basic with Level 1 data starts at $100 per month, and Level 2 data starts at $150 per month.

Das Trader Charts

TradingSim

TradingSim is a designed paper trading platform and offers a number of tools for simulation. To start, you can replay any trading session from the past three years and fast forward through time as you wish. In addition, the profit and loss reporting is much more detailed than what you’ll find in most advanced charting platforms with paper trading modes.

Another useful tool that TradingSim offers is risk management. Within the simulator, you can specify parameters for maximum account drawdown before your trading session resets. This is helpful for developing discipline that can be transferred to live trading, when risk management is essential to long-term profitability.

TradingSim offers simulators for either stocks and ETFs or futures. The stocks simulator includes data for 11,000 stocks and more than 1,000 ETFs, while the futures simulator includes data for the 20 most commonly traded contracts. Each simulator costs $24.75 per month on its own, or you can purchase stock and future data together for $35.75 per month.

TradingSim Platform

Conclusion

Paper trading platforms allow beginner traders to learn the ropes of trading safely as well as enable advanced traders to try out new strategies. While there are many free simulators, the best paper trading platforms typically require you to pay for data or to open a brokerage account. Ultimately, it’s important to look for a simulator that offers the specific tools you need to improve your trading strategy, as different paper trading platforms have different strengths and weaknesses.