Paper trading means making practice trades with pretend money at real market prices. You decide what to buy or sell, when, how much, and where to exit, exactly as you would with a real account, but no order is sent to the exchange. The name comes from the days when people wrote their trades on paper and tracked them against the newspaper prices.
On ScreenerCharts, the paper trading page gives you ₹10 lakh of virtual money to buy and sell NSE stocks at live prices and to follow option strategies built in the strategy builder. No real orders are placed.
Why practise at all
Trading has a steep and expensive learning curve. The first months are when most mistakes happen: wrong order types, quantities typed wrongly, stops forgotten, trading on tips, no plan for the exit. Paying for those lessons with real money is optional. Paper trading lets you:
- Learn the mechanics: order types, lots, how option prices move with the underlying, what happens at expiry.
- Test a method's rules on live markets, in real time, rather than only on past charts.
- Build habits: writing a plan before each trade, sizing from the stop, keeping a trading journal.
- Find out whether you like a style. Many people discover that watching an intraday options position every minute is not for them, which is a useful thing to learn for free.
How to paper trade properly
Paper trading only helps if you treat it as real. The most common reason it fails is that people trade the virtual money in a way they never would with their own.
- Use a realistic amount. If you plan to trade with ₹2,00,000, practise as if that were all you had, even if the account shows more.
- Write the plan first. Entry, stop-loss, target and size, before you click. See position sizing and stop-loss orders.
- Follow your own rules, including the boring ones like a maximum number of trades a day.
- Add costs. Practice accounts usually do not charge brokerage, taxes or exchange charges. Note an estimate for each trade so your results are honest.
- Journal every trade, including the reason and how you felt.
- Do it for long enough. A few weeks across different market conditions (trending, choppy, event days, expiry days) tells you far more than a few lucky days.
A live example: a practice intraday straddle
A popular trade to practise is the intraday short straddle on NIFTY: selling the at-the-money call and put in the morning and buying them back later. It is popular because it often makes small gains, and dangerous because it occasionally makes large losses. That makes it a good candidate for practice before real money. Here is the live NIFTY straddle:
To practise, note the straddle price at your chosen entry time, decide a stop on the combined premium (for example a set percentage above entry) and an exit time, then follow the line. Did the stop get hit before the exit time? How much did the straddle fall when it worked? On a quiet day the line slopes down; on a trending day it climbs, and the stop is what protects you. The intraday short straddle guide covers the trade in detail.
Before entering, check how much movement the market expects, so your stop and size are realistic:
The expected move is the range the options market is pricing to expiry. A short straddle loses money when the move is larger than the premium collected, so this range tells you how much room the trade has.
Paper trading and backtesting work together
Backtesting runs a rule on past data: "what would have happened if I had sold the straddle at 09:30 every day for the last few months?" It gives many results quickly. Paper trading runs the same rule forward, in real time, with your own decisions. You need both:
- The backtest tells you whether the rule had an edge on past data. The backtester can test indicator strategies on 1-minute candles and option strategies on recorded option chains; it fills sells at the bid and buys at the ask, which is closer to real life than using the last traded price.
- Paper trading tells you whether you can actually follow the rule, live, without hindsight. Many rules that look easy on a past chart are hard to follow when the price is moving against you right now.
See how to backtest a strategy for the common traps of testing on the past.
What paper trading cannot teach
- Real emotions. Losing ₹20,000 of virtual money does not feel like losing ₹20,000 of your own. Fear and hope change behaviour far more with real money: stops get moved, winners get cut early. Expect your real results to be worse than your paper results at first.
- Real fills. A practice order fills at the price on the screen. A real order may fill worse, or not at all, especially in thinly traded options or in fast markets. This is slippage.
- Costs. Unless you add them yourself, they are missing. On frequent intraday trading they can be the difference between profit and loss; see trading costs.
- Market impact. Larger real orders can move the price, especially in less liquid stocks. Practice orders never do.
Moving from paper to real money
There is no fixed rule for when you are "ready", but these are reasonable signs: you have followed your plan on almost every trade for several weeks, your journal shows positive results after estimated costs over a meaningful number of trades, and you can describe your worst realistic loss in rupees and are comfortable with it.
When you start, start small. Trade the smallest size possible (one share, one lot, or a defined-risk spread instead of a naked option) for the first weeks. The aim is not to make money yet, but to check that real fills, real costs and real emotions do not change your results too much. Increase size slowly, only while the journal keeps confirming the method.
It also helps to set, in advance, what would send you back to practice. For example: if real results after costs fall well below your paper results for a month, or you break your own rules on more than a few trades, return to paper trading, find the cause in your journal and fix it before trying again. Going back to practice is not a failure; it is far cheaper than learning the same lesson with a growing real loss.
Common mistakes
- Gambling with virtual money: huge sizes, no stops, trades you would never take with your own money.
- Resetting the account after losses. In real life there is no reset button; learn from the drawdown instead.
- Stopping too soon. A good first week proves nothing. Practise across different kinds of market days.
- Skipping the journal. Without records, paper trading is just watching prices.