What is Paper Trading?
Paper trading executes strategy on live or historical data without real money risk.
Formula
Paper Trading Process: 1. Open a Paper Account - Virtual capital: $100,000 - Real-time market data - Same order types as live trading 2. Trade as If It Were Real - Analyze charts and setups - Place buy/sell orders - Set stop-losses and targets - Trades execute at market prices 3. Track and Review Performance - Monitor open positions - Review closed trades - Calculate win rate and P&L - Identify what's working Example Trade: Buy 50 shares AAPL at $185.00 (paper) Stop-loss at $181.50 (paper) Sell at $192.00 (paper) Paper profit: $350 Real money at risk: $0
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Paper Trading shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Paper Trading on Nifty (24,300): backtest includes 9:15 liquidity and expiry-day behaviour; edge on index may vanish outside 10:00–14:30 window.
Reliance Industries perspective
Paper Trading on Reliance (₹1,300): liquidity is deep but event gaps dominate — strategy rules need explicit earnings blackout weeks.
Bank Nifty futures perspective
Paper Trading on Bank Nifty futures (55,000): high beta suits shorter holds; overnight paper trading must state NRML risk and gap plan in writing.
How to validate
- Validate Paper Trading only after costs — gross win rate can hide negative expectancy.
- Use walk-forward windows (e.g. last 60 / prior 60 trades) for stability.
- Retire or refactor the tag if Paper Trading expectancy turns negative with 50+ trades.
- Ensure no overlapping tags duplicate the same trades.
How to track in TradeLyser
- Define Paper Trading in Strategy Board with entry/exit/skip criteria.
- Enforce single-tag discipline — no secondary discretionary entries.
- Review expectancy, win rate, and avg R monthly on the tag only.
- Archive tag version when rules change; do not blend old and new trades.
Best practices
- One playbook page per Paper Trading strategy with non-negotiable rules.
- Paper trade rule changes for two weeks before live size.
- Track costs explicitly on high-frequency Paper Trading variants.
- Compare versioned tags after each rule amendment.
Common pitfalls
- Adding discretionary trades under the Paper Trading tag.
- Scaling up after one lucky week of Paper Trading results.
- Ignoring brokerage drag on high-frequency variants.
- Retiring a tag without exporting final statistics.
How to use this in TradeLyser
Tag paper vs live explicitly; do not merge in expectancy analytics.
Related terms
Backtesting applies strategy rules to past data to estimate performance — subject to bias.
Day trading opens and closes positions within the same session, avoiding overnight gap risk on cash products.
Discipline is repeatable adherence to entries, exits, size, and pause rules — especially after wins and losses.
A trading plan is a written contract with yourself: what you trade, when you trade, how much you risk, and how you review. It turns discretion into measurable rules.
FAQ
Paper too long?
Set promotion criteria — e.g. 30 sim trades with rule compliance.
Broker paper vs spreadsheet?
Broker sim closer to fills — note tool used.
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