As an up and coming investor, you should get a little practice before making life-changing investment decisions. Don’t gamble your money away and learn the consequences the hard way.
That’s why it’s important to practice before moving to the “real stuff”.
Have you ever wondered how to set up a paper trading account? This article is aimed at showing you why it really pays to do so.
This is the best way to ‘practice’ trading stocks before seriously getting into investments.
What is Paper Trading & Paper Money?
To effectively make use of paper trading practices, you should start by making use of paper money.
Paper trading is basically the notion of trading with fake money to see what outcome your investment decisions may lead to, and it is useful for a number of reasons:
When you plan to invest any given sum of money, you’d want to see the effect it has before taking the plunge with real money.
The benefits lie in the practice of making real trades without real money. With paper trading, you will get to test out various stock trading strategies, and practice as much as you want without taking any real-world risks whatsoever.
Make money as a result of real investment education. Start thinking along the lines of an investor rather than a gambler. Perfect your investment strategies to make your money work for you.
How to Set Up a Paper Trading Account
If you are looking to stay ahead of the stock market curve by using innovative tools and the right investment strategy, there is no better way than using the Thinkorswim platform.
Thinkorswim ® is an advanced virtual trading platform by TD Ameritrade that offers a holistic trading experience to keep you on top of your virtual investments.
In this platform, you will be getting innovative technology and cutting-edge features right at your fingertips.
You can empower yourself to analyze, devise strategies, and trade like never before.
Follow the 7 steps below to get your free account:
Step 1: Visit the Thinkorswim website and simply click “register here for PaperMoney”
Here’s the link: https://www.thinkorswim.com/t/pm-registration.html
Step 2: Register for a paper trading account.
If you’ve already opened a real trading account from TD Ameritrade, you don’t need to register a demo trading account.
You can use your existing account to login to the Thinkorswim® trading platform.
If you haven’t created an account yet, simply click “No” to fill out a few on-screen details before choosing a user ID and password.
Step 3: Fill in your information
Now it is time to fill in your information and choose your login username and password:
Sometimes TD Ameritrade may not let you create a demo account because you may be registering from a “restricted country or region”.
If you take the case, you can go ahead and use fictitious or made up identity.
Since this is just a demo trading account, it doesn’t violate any terms or conditions as it is for practice, so it’s no big deal.
Step 4: Review your information and create an account
It’s now time to review the information you have entered on the Thinkorswim® registration page:
Step 5: Download the Thinkorswim trading platform
After clicking on the “Register” button you need to download the Thinkorswim® trading platform.
The trading software is available on Windows, Mac, and Linux. Simply download and install the applicable version:
Step 6: Activate your paper trade account
The next step is to activate your account. TD Ameritrade will send you a confirmation email; click on the link and then log in to your account to activate it:
All set! Now you are good to go.
Step 7: Install the trading software and enjoy your free trading account
After installing the software, simply log in to the Thinkorswim® trading platform with your registered account.
Make sure you select “Paper Money”
After logging in successfully, you will see this screen – which is inside the trading platform:
You’ll instantly have $200,000 “paper money” to practice trading stocks with, options and ETFs, as well as $10,000 for Forex trading.
Use this account to practice until you get familiar with the stock market. Once you gain enough skills and knowledge, you can start trading with a real account.
How to Use Thinkorswim to Practice Trading Stocks
The main purpose of using paper money is to do real world investing with “FREE” money, which we shouldn’t lose sight of.
Even though you may want to add a million dollars to your paper trading account, it is not recommended because it’s better to practice with small accounts.
When you trade with a lot of money, it’s difficult to manage your profits and losses.
If you start with a huge sum of paper money, you will not have a sense of what’s going on with the market, and you will not care if you are losing money.
To make paper trading more realistic:
You should start with a small account.
Adjust the cash balance based on your actual financial capacity; for example, if you plan to start investing with $10,000, make sure you use a $10,000 account to practice with.
Try to grow that money – if you can turn $10,000 into $20k or even $100k, you are good to start trading with a real account.
Practice until you can make a profit, and understand exactly what you’re doing. Be confident about the investment decisions you have made.
This will give you a fairly good idea on how to start small, and gradually build up.
To adjust the cash balance, you can also follow the guideline above.
The Bottom Line — Practice Makes Perfect.
Even though you can really invest huge amounts of money and take big risks just to get a taste of how things work in the real stock market, it is importance to start small, in order to get things to work.
As long as you consistently practice, you’ll master the art of making sound real-life investment decisions through paper trading.
The more you practice, the more you will learn. Continue learning, and the more you’ll earn!
Congratulations, your investment journey has now begun! Good luck and keep at it.