isn t perfect
may provide false sense of security with distorted returnsno chance of earning real returnsallows for basic strategies which are more challenging in live tradingpaper trading vs live tradingpaper and live trading allow investors to make decisions on their own without having to consult with an investment professional such as a broker or dealer this allows them to make judgments and come to their own conclusion about trends in the market but there are key differences between the two that set them apart the most obvious difference is that paper trading doesn t come with the risks and rewards that come with buying and selling assets with real money traders can stand to lose and profit from using live accounts compared to using paper trading having said that live trading requires traders to have some grasp and knowledge of how the markets work in order to be successful this allows them to find ways to minimize any losses that may arise as a result of mistakes and if any losses do occur they may have the ability to recover quickly without sinking even further keep in mind though that investors may exhibit different emotions and judgments when risking real money this can lead them to different behavior when operating a live account consider a real trade by a new forex trader who enters a long position with the euro against the u s dollar ahead of nonfarm payroll data if the report is much better than expected and the euro drops sharply then the trader may double down in an attempt to recoup losses in a paper trade as opposed to taking the loss as would be advisable in a real trade 