Simple Investing Summary: learning through paper money is important but don’t always expect the same results in funded account with real money.
Investing in the market with paper money a.k.a simulated accounts, the performance is phenomenally different than with real money. Real money meaning money with which you can buy things, pay rent, travel, and more.
I’m a fan and proponent of getting a new investor/trader started with a simulated account first for a few months. This allows them the opportunity the learn about the markets, trading system to place orders, reactions to company announcements and news, etc.
Statistically, paper money account always outperforms a funded account with real money because fantasy money is way more powerful than real money. Human nature is “risk off” when there is nothing real at stake. People do things with these accounts that would be hard to replicate in funded accounts.
- Not emotionally attached with losing or winning. There are no real consequences: feel good if you are winning, shrug it of off if the trades are going against you.
- Endless funds to buy and sell a large quantity
- Ability to neglect losses and reset account for a fresh start any moment
Here’s a good article on CNN Money. How do you distinguish your trading or investing style from paper money versus funded account with real money?