Paper Trading UK Guide 2020

While trading can be exciting, it can also be risky. That’s especially true when you’re trying out a new trading strategy or transitioning to a new brokerage.

With paper trading, you can practice trading without risking real money. UK paper trading accounts give you access to many of the same features as live trading accounts, but without any of the pressure to perform well in the market.

In this guide, we’ll explain how paper trading works in the UK and why it’s worthwhile for many traders. We’ll also cover how to choose a UK paper trading account and highlight five of the best trading platforms you can try today.

What is Paper Trading?

Paper trading is simply simulated trading. The term ‘paper trading’ is a holdover from the days when practice trading was done with a pencil and paper – traders would simply record positions they would take if they were trading, and then add up the results of their imagined trades.

With paper trading, you’re still trading with real market data. The only thing that’s simulated is the money. Instead of committing your own, real money to paper trades, you’re given digital money that isn’t worth anything.Paper Trading UK

Paper trading is a great way to try out a new trading strategy or simply practice trading without the risk of losing real money. If you do lose simulated money while paper trading, it’s not a big deal. You can reset your account balance at any time and start from scratch.

Of course, the catch to UK paper trading is that you can’t make real money, either. Any profits you earn in a paper trading account exist only inside the market simulation, not in your real trading account.

Advantages of Paper Trading UK

Paper trading in the UK plays an important role in helping traders succeed. By using a trade simulator with real market data, you can test out new trading strategies or practice executing a strategy that needs improvement.

This allows you to see whether a strategy has merit – that is, whether it can deliver consistent profits – before you risk real money on it. If a trading strategy isn’t very good, you can save yourself some potentially significant losses by finding that out inside a UK paper trading account rather than inside your live trading account.

The same is true for trading a new asset class. If you’ve always traded stocks, for example, there can be a steep learning curve to switch to options trading or commodity trading. With a paper trading account, you can get a handle on how the prices of these assets move and how you can trade them profitably.

Try out a new broker's trading platform with paper tradingAnother good use of paper trading in the UK is to test out new trading tools. For example, if you want to incorporate a news feed or automated technical analysis tool into your stock trading, you can see whether those tools are helping or hurting you inside a paper trading account. The same goes for testing out forex signals or forex robots before deploying them for live forex trading.

UK paper trading is also a good way to test out a new stock broker or forex broker. Most brokers’ paper trading platforms give you access to the same charting tools and order entry system as their live trading platforms. So, you can familiarize yourself with the trading platform and fully understand the order execution process before putting money on the line.

Paper Trading Limitations

The main limit to paper trading is psychological. When paper trading in the UK, it’s easy to change your approach to trading without realizing it. For example, you might be willing to make much riskier trades with inside paper trading account than you would be when trading real money, simply because you know that any losses you incur are simulated.

For paper trading to be valuable, it’s important to avoid this mindset. You should approach paper trading in the same way you approach live trading to the greatest extent possible. If you normally set stop losses and take profit levels with every live trade, make sure to set them with every simulated trade, too. Along the same lines, if you typically wouldn’t use leverage for your live trades, don’t add leverage to your paper trades.

One way to develop good habits around paper trading is to start out trading like you would in a live session, using a strategy you already know. Once you’ve gotten into a groove, then try switching to a new strategy or incorporating a new trading tool. You’ll be much more likely to approach the strategy or tool you want to evaluate with a risk tolerance that reflects how you normally trade.

Paper Trading Strategies

Interested in using paper trading to try out new strategies? Here are three strategies that you can practice in a UK paper trading account:

Scalping

scalping tradingScalping trading is a popular day trading strategy that involves placing many short-term trades. The idea behind scalping trading is to trade at the start of a price movement, when it’s most likely to be strong and directional. Scalping traders don’t wait around for the price movement to complete, though – the idea is to exit your trade quickly, before the price move can collapse or reverse.

The return from any single scalping trade is typically very small. Scalping traders place dozens of trades per day to compound their earnings. The key to successful scalping trading is to keep your losses to a minimum so that no single trade can wipe out a whole day’s profits.

Swing Trading

Swing trading is a multi-day trading strategy. With swing trading, the goal is to profit off of shifts in momentum. You can enter a position at the beginning of a strong price movement, like a breakout or a reversal, and then hold your position as the movement develops. In order to protect your profits, it’s important to close out a swing trade as soon as the momentum of the price movement shows signs of wavering.

Price Action Trading

Price Action Trading UKPrice action trading is a trading strategy that relies on price data rather than on technical indicators. The magnitude and speed of price changes offers information about where the price is headed next, while technical indicators typically lag the market by several time intervals.

This style of trading can be subjective, in that two traders can look at the same setup and come to different conclusions about what the price will do next. So, price action trading is a good strategy to practice with UK paper trading.

How to Choose the Best Paper Trading Platform

While all paper trading platforms give you access to a simulator, not all platforms are made equally. Choosing the best paper trading platform is important to ensure that you’re getting the most out of your trading practice. So, let’s take a closer look some of the factors you should consider when choosing a platform for UK paper trading:

Account Size

A good place to start when choosing the best paper trading platform is to look at the size of your simulated trading account. Some platforms let you choose the size your account, while others assign you a starting balance. That starting balance could range anywhere from £1,000 to £100,000.

The size of your account should ideally be in line with the size of your live trading account. That way, you’ll be placing trades of roughly the same magnitude and you’ll have the same margin balance for placing leveraged trades. Trading with a massive paper trading account can give you a false sense of your potential returns.

Time Limit

Most high-quality paper trading platforms don’t put any limits on how long you can use your demo account. However, make sure to check whether you can reset your account at any time. Some paper trading platforms require you to reach a £0 balance or to contact customer support to clear your simulated trading history and start over.

Tradable Assets

The best paper trading account will have not just a wide variety of assets to trade, but specifically the assets that you’re interested in trading. If you plan on trading, say, Tesco shares, then your paper trading account should offer simulated trading for this stock. Most UK brokers offer the same assets in their paper trading platforms as they do in their live trading platforms.

Fees

Ideally, paper trading in the UK should be free. At many top brokers, it is. There are no commissions or spreads since you’re not placing real trades, and many of the best paper trading platforms don’t charge account fees.

However, watch out for brokers that charge inactivity fees or other account fees. If you’re only paper trading and not placing live trades for a period of several months, you could incur an expensive inactivity fee.

Trading Platform and Tools

The trading software that you get access to varies widely between paper trading platforms. Some platforms use proprietary software that has been developed by a broker. This is great if you want to explore a new broker, since you get access to all the charting and order entry tools. That said, proprietary paper trading platforms are unique to a single broker – so you’ll have to learn a whole new software interface if you switch platforms in the future.eToro paper trading platform

Other brokers offer UK paper trading using popular – and common – software like MetaTrader 4 or 5. Since this software is used by multiple brokers, strategies, techniques, and custom indicators transfer well across platforms.

Another thing to consider is whether your paper trading account is available on mobile devices. Unfortunately, this isn’t the case for many trading platforms that have mobile trading apps. You may be able to place live trades across devices, but you’re limited to paper trading on your computer.

Educational Tools

Some of the best paper trading platforms offer educational tools along with trading tools. These tools can help you get the most out of paper trading by offering tips and insight as you trade. For example, some demo accounts can point out common trading setups or candlestick patterns to help you recognize them in real time. While more experienced traders might not need these educational add-ons, they can be extremely useful for beginners.

Customer Service

Most traders will never need help with their paper trading accounts. But if something does go wrong, it’s helpful to have someone to talk to. Check whether your trading platform offers customer support and whether it’s available 24/7. It’s also worth ensuring that support is available for paper trading accounts, not just live trading accounts.

Best Paper Trading Accounts 2020

With those criteria for what makes a good paper trading account in mind, how do you find the one that’s best for you? There are dozens of paper trading accounts available in the UK. To help you choose, let’s take a look at five of the best paper trading platforms you can get started with today.

1. eToro – Commission-free Social Paper Trading

etoro logoeToro offers a free UK paper trading accounts that starts you off with £100,000 to trade. The broker offers 100% commission-free share dealing and CFD trading for stocks, forex, bonds, commodities, and cryptocurrencies. The paper trading account itself is free, and eToro’s £8 per month inactivity fee doesn’t kick in until you’ve been on the platform for a full year.

With a paper trading account, you can access all of eToro’s deep features. That includes a proprietary charting software with more than 100 technical indicators and drawing tools. You also get access to eToro’s social trading network, which allows you to interact with thousands of other traders and quickly gauge market sentiment.

The only catch to eToro’s paper trading account is that it isn’t available on mobile devices. This is somewhat disappointing, since eToro has an excellent mobile trading app for live trading.

Pros:

  • 100% commission-free trading
  • Wide variety of assets to trade
  • Low inactivity fee with 12 months free
  • Supports social trading

Cons:

  • Paper trading isn’t available on mobile

75% of retail investor accounts lose money when trading CFDs with this provider.

2. Plus500 – Practice CFD Trading with Low Fees

Plus500 LogoPlus500 is another top UK CFD broker that offers free paper trading accounts. With Plus500, the switch between paper trading and live trading is seamless – all you have to do is toggle a switch within the trading platform. That makes Plus500 one of the best paper trading platforms for day traders who want to quickly simulate trades in real-time throughout the day.

We also like this broker because it offers a wide range of trading at low cost. You can use CFDs for stock trading, forex trading, commodity trading, and cryptocurrency trading. All trades are completely commission-free and Plus500 has some of the lowest CFD spreads we’ve found in the UK. Just watch out for the inactivity fee when paper trading, which takes effect after just three months.

Plus500’s proprietary charting software is extremely user-friendly. It comes with dozens of built-in technical indicators and offers the ability to set price alerts on any asset. Better yet, Plus500 has a mobile trading app that can be used for paper trading. Price alerts you set on the desktop can even be pushed to your smartphone to help you stay on top of the market.

Pros:

  • Seamless switching between paper and live trading
  • Commission-free trading with low spreads
  • User-friendly charting software
  • Mobile app with price alerts
  • Trade CFDs for a wide range of assets

Cons:

  • Inactivity fee after three months

80.5% of retail investor accounts lose money when trading CFDs with this provider.

3. IG – Paper Trading with Advanced Charting Software

IG logoIf you want to practice trading a wide range of assets, it’s worth exploring what IG has to offer. This well-established UK broker offers trading on thousands of shares and ETFs from exchanges around the world. Plus, you can trade CFDs or place spread bets on forex, commodities, and cryptocurrencies. IG even supports options trading and futures trading, although only through CFDs and spread betting.

The best thing about IG, though, is that it offers two of the best charting packages on the market today: MetaTrader 4 and ProRealTime. MetaTrader 4 allows you to practice using forex signals and forex robots, as well as to design your own custom indicators. ProRealTime supports any type of asset and similarly allows you to create your own indicators and to backtest a new trading strategy. Both platforms have steep learning curves, so paper trading with them can be very helpful.

Paper trading with IG is free and all trades with this broker are commission-free. However, IG does charge a premium for its services through above-average CFD spreads. There is a small inactivity fee, but it won’t take effect for two years.

Pros:

  • Wide range of assets
  • Supports share dealing, CFD trading, and spread betting
  • Includes MetaTrader 4 and ProRealTime
  • Commission-free trading
  • Inactivity fee not assessed for two years

Cons:

  • High spreads for CFD trading

There is no guarantee you will make money when trading CFDs with this provider.

4. AvaTrade – Best Options Paper Trading Account

AvaTrade LogoAvaTrade is the best paper trading platform for practicing options trading. This broker offers a dedicated options trading platform known as AvaOptions. It’s preloaded with more than a dozen popular options strategies, and it will automatically display your potential profit and loss for any options trade. Just keep in mind that options trading is only available for forex, not for stocks.

Of course, AvaTrade has a lot more to offer than just options. You can trade CFDs for hundreds of stocks as well as forex, commodities, and cryptocurrencies. A paper trading account unlocks AvaTrade’s standard charting software, which is easy to use and comes preloaded with popular indicators, as well as MetaTrader 4. Paper trading with MetaTrader 4 is a good way to practice with forex signals.

All trading at AvaTrade is commission-free and there’s no cost to open a UK paper trading account. However, you’ll want to be careful to avoid the inactivity fee at this broker. It’s a whopping £40 per month, and it takes effect after just three months without a live trade.

Pros:

  • Dedicated forex options trading platform
  • Trade CFDs for stocks, forex, and commodities
  • Includes paper trading with MetaTrader 4
  • All trades are commission-free

Cons:

  • Very high inactivity fee

There is no guarantee you will make money when trading CFDs with this provider.

5. Capital.com – Paper Trading with Educational Tools

Capital.com logoCapital.com stands out for beginner traders because it offers a huge library of educational resources. In addition to the trading guides that most UK brokers have put together, Capital.com has an interactive mobile app that’s entirely dedicated to trader education. With the app, you can learn more about popular trading strategies and technical indicators, then try them out in your paper trading account.

Capital.com’s trading platform is fairly easy to use. It offers a wide variety of built-in indicators and a user-friendly charting and order entry interface. Another nice thing about Capital.com’s platform is that it comes with an artificial intelligence assistant, which can analyze your trades (even your paper trades) to look for patterns that influence your win rate.

CFD trading with Capital.com is available for stocks, forex, commodities, and cryptocurrencies, although the selection is more limited than at other brokers. All trades are commission-free and the spreads are surprisingly low given the trading tools this broker offers. The inactivity fee is reasonable, too, and you only have to place one live trade per year to avoid it.

Pros:

  • Dedicated trader education app
  • User-friendly charting software
  • AI assistant analyzes your trades
  • Commission-free trading with low spreads
  • Inactivity fee only after one year

Cons:

  • Limited CFD selection compared to other brokers

There is no guarantee you will make money when trading CFDs with this provider.

Paper Trading PlatformCommissionDeposit FeeInactivity FeeWithdrawal Fee
eToro£0 (variable spread)£0 (0.5% currency conversion fee)£8 after 1 year£4
Plus500£0 (variable spread)£0£8 after 3 months£0
IG£0 (variable spread)£0 (0.5% on credit cards)£9 after 2 years£0
AvaTrade£0 (variable spread)£0£40 after 3 months£0
Capital.com£0 (variable spread)£0£11.50 after 1 year£0

Paper Trading UK Pros & Cons

Pros:

  • Risk-free environment for learning how to trade
  • Try out new strategies or asset classes
  • Often free or inexpensive to use
  • Familiarize yourself with a broker’s trading platform
  • Test trading tools to see how they integrate with your strategy

Cons:

  • Easy to take bigger risks when trading with simulated money
  • Can incur inactivity fees at some brokers
  • May encourage taking greater risks than you would when live trading

How to Start Paper Trading

Ready to jump into paper trading in the UK? We’ll show you how to get started using eToro, which offers commission-free trading on a wide variety of assets plus a powerful social network.

Step 1: Open a Trading Account

With eToro, you get a paper trading account automatically when you open a new trading account. Head to the broker’s home page and click ‘Join Now.’ Then enter a new username and password for your account along with personal details like your name, email, and birthdate.Click Join Now to open a new eToro account

eToro will ask you to verify your identity to comply with UK government regulations. You don’t need to do this to start paper trading, but it’s a good idea to complete this step now if you plan to move to live trading later. Simply upload a copy of your passport or driver’s license and a copy of a recent bank statement or utility bill.

Step 2: Deposit Funds

eToro requires a minimum deposit of £140 when you open a new account, even if you only plan to practice trading with a paper account. This money is not at risk when you are paper trading, and you are free to withdraw it later.

eToro offers several ways to pay:

  • Credit or debit card (Visa or Mastercard)
  • Neteller
  • Skrill
  • Bank transfer
  • Wire transfer

Step 3: Start Paper Trading

To start paper trading, head to the eToro dashboard and click the ‘REAL’ button in the navigation pane. In the drop-down, select ‘Virtual Portfolio’ to switch from live trading to paper trading. You should now see a simulated account balance of £100,000.Paper trading on eToro

You can place your first paper trade by searching for any asset in the dashboard and then clicking ‘Trade’. This will open an order form where you can enter how much virtual money you want to trade. Just as for a live trade on eToro, you can set stop loss or take profit levels and choose whether to use leverage.

When your paper trade is ready, click ‘Open Trade’ to complete your first simulated trade.

Conclusion

Paper trading is a relatively safe way to practice trading. You can try out new strategies or understand how a new asset class works before committing money to trading it. While UK paper trading can be a very effective tool, it’s important to approach it as if you were trading real money. Otherwise, paper trading makes it easy to shift your approach to take greater risks than you normally would.

Ready to start paper trading? Open a UK paper trading account with eToro today!

eToro – Best Free UK Paper Trading Platform

75% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

Can I place limit and stop orders when paper trading in the UK?

Yes, most paper trading platforms allow you to use risk management tools like limit orders and stop orders.

Is price data presented in real-time when paper trading?

Some paper trading platforms present real-time price data, while others delay price data by up to 60 minutes. Regardless of whether the data is delayed, all of the prices displayed are real data from the current trading day.

Can you apply leverage when paper trading?

Many brokers’ trading platforms allow you to apply leverage when paper trading. Typically, the maximum leverage you can apply is the same as for live trading. Margin requirements are also the same between paper trading and live trading.

Can I paper trade outside of normal market hours?

If your paper trading platform uses real-time price data, you will not be able to paper trade outside of normal market hours. Some platforms allow you to replay the prior market day on-demand, in which case you can paper trade at any time.

Do I need to deposit money to open a UK paper trading account?

Whether or not you must deposit money to open a UK paper trading account varies by platform. Some brokers require a minimum deposit of up to £140, while others don’t require any deposit to start paper trading.

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
Michael Graw

About Michael Graw

Michael Graw is a freelance journalist based in Bellingham, Washington. He covers finance, trading, and technology. His work has been published on numerous high-profile websites that cover the intersection of markets, global news, and emerging tech. In addition to covering financial markets, Michael’s work focuses on science, the environment, and global change. He holds a Ph.D. in Oceanography from Oregon State University and worked with environmental non-profits across the US to bridge the gap between scientific research and coastal communities. Michael’s science journalism has been featured in high-profile online publications such as Salon and Pacific Standard as well as numerous print magazines over the course of his six-year career as a writer. He has also won accolades as a photographer and videographer for his work covering communities on both coasts of the US. Michael has been a member of the LearnBonds team since March 2020.