If you are just starting with online trading, you may be looking into setting up a online paper trading account. Paper trading, or virtual trading, is where you simulate real trading without actually investing real money.

This is just another way we can use technology to help us achieve better results. With paper trading, you are looking at real stocks and real stock prices as they move over time. Many times, the charts you use through your online broker are the same ones you will use when doing real trading. Paper trading is a fantastic tool. There are two ways to use this tool to help you increase the money you make from online trading. One way is obvious - the other one is not:

1. Use Online Paper Trading to Practice Before You Start Online Trading

For the beginner to online trading, you would use a paper trading account to practice in a close to real environment. You may not be comfortable investing real money right away, but would rather select a few stocks and and track them over time to see how they do. This is obviously a smart thing to do if you want to eliminate the risk of losing money. It can be great practice for the beginner. Once you start to see consistently profitable trades, or consistent profits on average, you can move on to the real thing - putting your own money at risk.

2. Use Online Paper Trading to Test Out New Investing Strategies

An experienced investor can also use paper trading as a testing ground to try out new strategies or try new types of investing. This would be in addition to the real money investing they do.

Starting out with anything new is more risky than when you have been doing it for awhile. So it just make sense to use practice tools to try these new things, but without risking real money. So as an example, let’s say that you are trading penny stocks. You are able to make consistent profits. But because of their volatility, you will only trade up to $500 at a time. This limits your overall profit potential. You want to trade more expensive stocks, but don’t have experience in this area. You can use that paper trading account to explore stocks priced in that range until you are sure you can earn larger profits.

Another example is if you have developed good experience buying and selling stocks, but you have stuck to basics. You would like to explore selling short and options, but don’t have any experience in those areas. Again, use that paper trading account to explore the stock-picking process and the steps you take to execute those trades.

Online paper trading is a great way to start trading stocks. To pick the best online broker for you, compare brokers side-by-side across important ratings of cost and quality.