It’s natural for newer traders to feel a bit of trepidation before they get started. After all, that’s your money on the line. Yet not everyone is familiar with a tried-and-true practice that lets you build confidence and gain experience before risking any losses: Paper trading. In this post, we will walk you through how paper trading works, show you how to paper trade futures, explain the differences between live trading vs paper money and explain the paper trading pros and cons. Let’s get started with a quick explanation.  

What is Paper Futures Trading?

Paper trading allows you to trade stocks, options and futures with virtual money. In other words, you can simulate returns in the market without actually buying and selling investments. In some ways, paper trading is the equivalent of a fantasy sports league. The stock, options or futures plays aren’t real, but you can gain a much deeper understanding of market strategies by making them and tracking their performance over time.  

Ways to Paper Trade Futures

Getting started with a paper trading account is extremely simple: You find the right broker or trading platform partner and request access to a “demo account.” This demo account acts just like a real trading account, with one exception: It’s funded with simulated money, courtesy of your broker. Many of the other trading features you’d find enabled in a traditional trading platform are also available through your demo account. RJ O’Brien makes paper trading easy by offering a free demo account that includes a range of powerful trading tools. Once you’ve been approved, you can use your demo account to begin paper trading futures or any asset in which you’re interested.  

Benefits of Paper Trading Futures

Paper trading offers some very significant benefits.  

Get Your Bearings

First, it helps new or newer traders get their feet wet in a safe, risk-free environment. This means traders can build confidence in their abilities without the pressure or anxiety that may arise if you begin live trading without sufficient experience.  

Familiarize Yourself With Your Tools

Next, paper trading allows traders of all skill and experience levels to become comfortable with the platform they are using. Having a degree of comfort and familiarity with your tools is important, as it allows you to derive maximum value from them and avoid mistakes.  

Validate Your Trading Strategies 

Paper trading is also ideal for testing new trading ideas and strategies and gauging their performance. The best traders are often the most nimble, creative and innovative in their approaches. Paper trading is an excellent proving ground for new strategies. You can keep those that test well under simulated conditions and discard the others.  

Downsides of Paper Trading Futures

We’ve talked about the pros of paper trading, but what about the cons? While these are not necessarily significant disadvantages, there are a few things that bear mentioning:  

It’s Not a Perfect Simulation

While paper trading can simulate trades in a risk free context, it cannot perfectly replicate live trading. The emotional response that many people have to the natural ups and downs of the market is muted when you’re trading virtual money. This means it’s more difficult to learn how to control your emotions and avoid cognitive biases under a simulated setup.  

It May Make You Overconfident

As any experienced trader knows, the market has continuous ebbs and flows. That’s why it’s important to think long-term and big picture. However, if your paper trading activity occurs on a too brief time horizon, you may become overconfident if you have early success, but don’t keep practicing long enough to encounter any adversity (even if it’s the digital kind).  

Don’t Get Drawn Into “The Game”

Demo accounts have a game-like feel because the money isn’t real – it’s more akin to points. Because the money isn’t real, you may get tempted to take much bigger risks than you normally would. If the market moves against you, there’s no margin call waiting for you. That bold attitude toward risk management is poor preparation for live trading, however, where smart position sizing and portfolio allocations are critical to success.  

How Do You Know When You’re Ready for Live Trading?

This depends on the person and their experience level. In most cases, you’ll be ready for live trading once you demonstrate an ability to execute successful trading strategies over a significant period of time. Additionally, you will want to wait until you have a strong working knowledge of all of the trading tools your platform offers. And when it comes to trading tools, no platform on the market has more to offer futures traders than RJ O’Brien.  

How to Paper Trade Futures With RJ O’Brien

If you’re looking for a great free paper trading account for futures, RJ O’Brien has you covered. Features for our demo accounts include:
  • You start with a free $100,000 in simulated funds
  • Our trading demo accounts come with live market data and execution
  • There is no risk of losing capital since you are not using real money. Great for practice and gaining experience
  • We offer Click N’ Trade – one click trading from charts, price ladder (DOM) & order ticket screens
  • We offer Click N’ Drag – cancel/replace orders without typing
  • RJ O’Brien gives you maximum flexibility with OCO orders with GTC capability
  • We feature alerts based on price, study, or time can trigger order placement
  • You can use our options window with options calculator and ‘what if’ scenarios
  • DOM Trader (price ladder) is available
  • Major chart studies are available – moving averages, volume & open interest, RSI, Oscillator, DMI, etc.
  • And much more
When you tabulate the pros and cons, the truth is there is no reason not to open a demo account with RJ O’Brien.  We urge you to visit this link to request your demo – and get started today!