Many people new to currency trading begin by creating a trading strategy and then noting down the resulting trades on paper to see how they would have performed. This is known as paper trading and is extremely popular with a lot of people who are just learning the ropes.

In the world of forex trading, paper trading is actually quite a good idea because you can test out your trading strategy knowing you aren’t at risk of losing any money. If they don’t perform as you would have liked, you haven’t lost any money, and you can simply start again with a different strategy.

Similarly if you join a forex broker that offers a free practice account, you can practice opening and closing trades using fictional money. This of course enables you to get used to trading with your broker’s trading platform, and will be of benefit to you when you finally start trading with your own money.

The only problem with paper trading is that it can never truly replicate the feelings and emotions you experience when you are actually putting your own money at risk. When placing trades on paper it isn’t a problem if they don’t move in the desired direction, but when trading for real your heart will be pumping very fast and you will be a lot more stressed out.

You also have to bear in mind that when trading a live account, the spreads may increase during busy times of the day, however paper trading doesn’t take this into consideration. In addition you may well have traded differently in a real trading environment.

So the point I want to make is that although paper trading is a good idea to start off with, you should always be aware that forex trading for real is is a completely different challenge. Even if paper trading seems to yield some excellent profits, you should not assume that this success can be replicated with a real money account.

Currency trading is not an easy way to make money, and in fact it’s often better to lose some of your trading capital at the beginning because this will help you develop into a winning trader.