What is Paper trading?
Paper trading is running a strategy on live market prices with virtual money, so nothing reaches an exchange or broker and no real funds are at risk.
What does Paper trading mean in practice?
Where a backtest replays finished history, paper trading runs forward in real time. It meets partial candles, spreads that move, and signals that arrive a moment late. Those are exactly the things a backtest quietly assumes away.
The most useful output is not the profit figure but the drift: the gap between what the backtest predicted and what the same rules did live. A small, explicable drift is encouraging. A large one usually means the backtest was flattering the strategy.
A worked example
Illustrative only: a backtest suggests about 12 trades a month. Paper trading produces 5. The shortfall is information: the conditions are rarer than history implied, or the rules are stricter in practice than they read.
How to read or test it
Run the same rules you backtested, unchanged, for long enough to see several trades. Record the number of trades, the average fill compared with the signal price, and any rejected or skipped orders. Then lay those against the backtest's figures. Differences are not failures, they are findings: each one points at an assumption the simulation made that live prices did not honour. Resist adjusting the rules mid-run, or you are no longer comparing like with like.
How AKQX handles Paper trading
AKQX paper trading uses virtual capital in a separate paper wallet per market, with broker-style margin, and deducts fee and slippage estimates. A free account runs one paper algo.
See Paper trading platform for the feature page.
A common mistake
Skipping it because the backtest looked good. The backtest cannot show you live behaviour.
Educational only. This entry explains a term. It is not investment advice and does not recommend any trade, setting or strategy, and example numbers are illustrative, not results.
Related terms
Test the idea instead of taking it on trust
A free account includes 10 backtests a month and 1 paper algo, with no card and no broker connection.