Paper trading is a fun and effective method for testing out your investment strategy in a simulated market environment.
It is also a great opportunity to learn more about investor behavior and market psychology including some of the most common investor fallacies such as:
Representatives Bias: The tendency to make decisions based upon stereotypes or former learning.
Overconfidence: The tendency for new investors to over-estimate their forecasting skills or ability.
Anchoring: The tendency to fix or adhere to a course of action once it has begun.
Gambler's Fallacy: The tendency to believe a trend is due for a reversal despite probability.
Availability Bias: The tendency to emphasize the importance of easily obtainable information.