Foundation course in algorithmic trading
Paper Trading: From Simulation to Live
Paper trading done properly: how simulated accounts fill orders, the gaps between paper and live results, how to design a paper period with a clear pass or fail, and a checklist before real money.
Paper trading runs a strategy on live data with simulated money. It is the step between a backtest and real risk, and it is often skipped or done badly: a few days of watching, then a decision made on feel.
What does paper trading prove, and what does it not?
It proves that your code, data feed and routine work in real time, and it gives an out-of-sample record that no amount of backtesting can. It does not prove that your orders would fill as simulated, because a paper order takes no place in the real queue and moves no price. Knowing which half you have tested is the point of the first two modules.
How do you know when a paper period has passed?
You decide before it starts. The course has you write the criteria in advance: number of trades, acceptable drift from the backtest, maximum drawdown, and the errors that end the test. Then you run it and judge against what you wrote, not against what you hoped.
Who is this course for?
Anyone about to put a first algorithmic strategy into the market. It is short, practical, and a natural companion to Python for Algorithmic Trading.
What you will be able to do
- Explain how broker paper-trading accounts simulate fills and where they differ from live markets.
- Set pass and fail criteria for a paper period before it starts.
- Compare paper results with the backtest and explain the differences.
- Decide on position size and loss limits for the first live period.
Syllabus, module by module
What paper trading tests
Code, data feeds and process, but not market impact or your own nerves.
How simulated fills work
Fill-at-touch, fill-at-last and queue assumptions in common broker simulators.
Designing a paper period
Length, number of trades, criteria set in advance, and what counts as a failure.
Paper versus backtest
Reconciling trade by trade, and the usual sources of drift.
Going live
Starting size, loss limits, monitoring, and the conditions for stopping.
How the certificate is earned
Weekly quizzes and one graded problem set: you write a paper-trading plan with criteria for one of your strategies, run it, and compare the results with its backtest. On a pass you receive the Course certificate in Paper Trading, issued by the Institute with a verification code. Read how certification works.
Before you start
A strategy you have backtested, or the strategies from Algorithmic Trading Foundations.
Questions applicants ask
How long should I paper trade before going live?
Long enough to see a meaningful number of trades and at least one unusual market day. For a daily strategy that is often months; for an intraday strategy, weeks. The course shows how to set the number for your own strategy.
Are paper trading results realistic?
For small orders in liquid markets they are usually close on fills but optimistic on slippage. For limit orders and less liquid instruments they can be badly optimistic. The course explains why.