What is paper trading?
Paper trading means tracking a hypothetical trade instead of placing a real order. You choose what you would trade and observe the outcome without committing money. A trading simulator can help you practice expressing a trade idea in concrete terms: which stocks, which side, how many shares and under what conditions.
That makes paper trading useful for learning, but it does not make it equivalent to live trading. A simulated outcome is a record of what happened under the simulation’s assumptions. It is not proof that a broker would have filled the same order at the same price, or that you would have made the same decisions with money at stake.
How PreTrAIde’s trade simulator works
PreTrAIde is an AI pre-trade analysis platform for stocks. You first build a basket of one or more stocks. Each line has a buy or sell side, a quantity and execution conditions. Before you place an order with your broker, you can run a PreTrade analysis on that basket.
The analysis returns a GO, NO-GO or MODIFY verdict for the basket and for each line. It also provides a model-estimated success probability, a risk assessment, a suggested execution strategy and reasoning in plain language. The probability is bounded between 5% and 95%; it is neither a guarantee nor a forecast of returns. The verdict is decision support, not an instruction to trade.
After the verdict, you can open a paper-trading simulation of the basket and follow how it would have performed. This separates two questions worth examining: What did the pre-trade analysis say before the trade? and What happened to the simulated basket afterward? The simulator uses no real money. PreTrAIde does not receive, transmit or execute orders; if you decide to trade, you place orders yourself through your own broker.
The trade simulator is available on every PreTrAIde plan. A PreTrade analysis uses one analysis credit; the plan limits and trial details are on the pricing page.
Why simulate a basket after a verdict?
Test an idea without putting money at risk
A basket makes an idea specific. Instead of saying “I’m interested in these stocks,” you set out the side and quantity for each line. You can then follow a hypothetical outcome without taking on the financial exposure of a real trade.
Consider a clearly hypothetical basket: a buy of 10 shares of Stock A at US$50 and a buy of 5 shares of Stock B at US$100. At those reference prices, each line represents US$500, and the combined reference value is US$1,000. Writing down the quantities matters: a US$1 move in Stock A changes its line value by US$10, while a US$1 move in Stock B changes its line value by US$5. This example is arithmetic, not a prediction or a description of how the simulator values positions.
Compare the pre-trade assessment with what followed
A verdict is made before the subsequent market outcome is known. Following the basket afterward gives you a way to examine that earlier assessment in context. A favorable simulated outcome does not establish that the verdict was correct for every reason given; an unfavorable one does not, by itself, establish that the analysis was wrong. Outcomes can be affected by market moves and events that were uncertain at the time.
For a useful review, keep the distinction between an observation and an explanation. “The basket’s simulated value fell” describes an outcome. “The execution would have been impossible” is a different claim and cannot be established from a price path alone.
Learn to check execution assumptions
The price you see in market data is not automatically the price available for your entire order. A real buy may face the ask; a real sell may face the bid. Larger orders can also incur market impact, and an order with restrictive conditions may not fill at all.
PreTrAIde’s pre-trade analysis estimates factors relevant to execution, including spread, participation in daily volume, market impact, liquidity and volatility. Those estimates give you questions to carry into a simulation review: Was the proposed order large relative to typical trading volume? Could the spread have mattered to a small expected move? Would the conclusion change if execution were less favorable? The simulator’s subsequent outcome should not be treated as confirmation that any estimated cost became an actual fill.
What paper trading cannot reproduce
Paper trading removes financial risk from the exercise. It does not remove uncertainty about what a live trade would have done. In particular:
- Real fills are not guaranteed. Available liquidity, order priority, changing quotes and your broker’s execution can affect whether, when and at what price an order fills. A simulated result is not a real execution record.
- Execution costs can differ. An estimated spread or market impact is an input to analysis, not a receipt for costs you actually paid. Real outcomes can also depend on broker-specific charges and order handling.
- Behavior changes when money is at stake. It may be easy to let a paper position run while you would hesitate, change an order or exit early in a live account.
- One outcome is weak evidence. A basket can perform well or badly because of a broad market move or a stock-specific event. A single simulation cannot establish that an approach is reliable.
These limits do not make paper trading pointless. They tell you what to use it for: practicing a process and observing a hypothetical outcome, while keeping claims about real-world execution appropriately narrow.
Paper trading vs backtesting
Paper trading and backtesting both examine hypothetical trades, but they move through time differently.
| Question | Paper trading | Backtesting |
|---|---|---|
| When are trade choices specified? | Before the future outcome is observed | Applied to historical data |
| What is being followed? | A hypothetical trade or basket as time passes | A rule or strategy across a past period |
| What is a common use? | Practicing decisions and reviewing what followed | Exploring how defined rules would have behaved historically |
| What is a shared limitation? | Neither guarantees a real fill or a future result | Neither guarantees a real fill or a future result |
A backtest needs clear rules about entries, exits, position sizes and costs. Otherwise, it is easy to select rules after seeing the historical result. Paper trading has a different discipline: decide what the hypothetical trade is before observing what happens next.
PreTrAIde’s described simulator follows a basket after its verdict. It is a paper-trading feature, not a claim that PreTrAIde runs historical strategy backtests.
How to make a paper-trading review more useful
Start with an explicit basket rather than a vague watchlist. For every line, note the stock, buy or sell side, quantity and execution conditions. Review the pre-trade verdict and its reasoning before the outcome is known. That sequence helps preserve the difference between an advance assessment and an explanation assembled afterward.
Then ask a few bounded questions as you follow the simulation:
- What did I intend to test? For example, was the question about a single stock or about the combined basket?
- What risks were visible beforehand? Check the analysis for liquidity, volatility, execution and basket-level concentration concerns.
- What did the simulated outcome show? Describe what happened without converting it into a claim about a real fill.
- Which assumptions remain untested? In particular, identify uncertainties about order execution and how you would have acted with real money.
If you later place a real trade, keep its actual execution separate from the paper result. PreTrAIde Memory lets users log what they actually executed, including partial executions, skipped trades and real fill prices. It measures the outcome from market data and can personalize later AI analyses; the quantitative scores stay identical. A logged real trade and a simulated basket answer different questions, so neither should be substituted for the other.
A simulator is a learning tool, not an order
The useful output of paper trading is a clearer record of your proposed trade, the assessment available beforehand and the hypothetical outcome afterward. It can help you examine assumptions without risking capital in the exercise. It cannot tell you that a live order would have filled identically, eliminate the emotional pressure of real trading or turn a past outcome into a promise about the next one.
PreTrAIde keeps that boundary explicit: its simulator follows a basket after pre-trade analysis, while any real trading decision and order remain with you and your broker.