Getting the Most from Stock Paper Trading: Matching Market Hours, Delayed Quotes, Fees and Transaction Tax to Reality

What stock paper trading lets you practice

Stock paper trading means placing orders with virtual money on top of real prices. Writing your rules down, sizing positions backward from the amount you can lose, and why paper results tend to look better than reality are covered in detail in the guide on getting the most from crypto paper trading, so this guide focuses on conditions specific to stocks. Crypto trades around the clock, but stocks fill only during set hours, and free stock quotes are usually several to tens of minutes late. Selling Korean stocks incurs a transaction tax, and US stocks trade in dollars, so the exchange rate enters your profit and loss. If you practice without these conditions, too much will be new when you move to a real account. So the aim of stock paper trading is not to raise returns but to practice keeping your rules under the same time, cost and currency conditions as reality. This guide goes through matching each condition to reality.

Rules to write down before you start

Before starting, write the items below in a note or on the first page of your trading journal. If they live only in your head, you will quietly change them after seeing results, and nothing will remain of what you practiced. Starting with a much larger amount than you would really use because the virtual balance is generous also removes the chance to practice how losses of that size feel. Don't change the rules during a practice period; if you want to, write the reason when the period ends and start a new one. Rather than setting too many items at the start, making just the six below clear is enough.

• Account size: set it close to the amount you actually plan to manage
• Markets: decide whether you trade only Korea, only the US, or both
• Loss per trade: decide how much one trade may lose and work the quantity backward
• Order timing: decide whether you order only during the session or leave orders while the market is closed
• Cost assumptions: check your broker's fees and this year's transaction tax rate and write them down
• Practice period: decide how many weeks or trades count as one batch

Market hours: when orders fill

The first thing to get used to in stock paper trading is market hours. A market order placed outside regular hours does not fill immediately but waits for the next session, and the opening price can differ greatly from the previous close. US stocks trade during the Korean night, so you need to know in advance when and at what price an order placed during the day will fill. The list below covers regular sessions; extended hours and the longer hours of alternative venues are run differently by each broker, so check them separately. Around the start and end of US daylight saving, US hours shift by an hour in Korean time, so recheck your order plans that week.

• Korea (Korea Exchange): 9 a.m. to 3:30 p.m. Korean time
• US (NYSE, Nasdaq): 9:30 a.m. to 4 p.m. local time. In Korean time, 10:30 p.m. to 5 a.m. the next day during US daylight saving
• Outside US daylight saving: 11:30 p.m. to 6 a.m. the next day Korean time
• Holidays: each country has different holidays, so some days only one market is open

Delayed quotes and fill prices

Free stock quotes often arrive 15 to 20 minutes or more late depending on the exchange. A market order in paper trading fills at that delayed price, so even if the screen shows you bought at the price you wanted, the real market may have moved in the meantime. The gap grows when prices move fast, such as right after the open or around earnings. If limit orders are judged by whether a price polled every few minutes touched the limit, a price that touched briefly and came back in between is missed. Conversely, a real market has an order book and a queue, so your order may not fill even when the price touches it, and paper trading usually simplifies this. So read paper fill prices as roughly around here, not as I could have bought at this price. Getting into the habit of checking the quote's timestamp to see how late it is will make the move to real trading less of a surprise.

Fees and transaction tax are adjustable assumptions

Buying and selling stocks incurs a brokerage commission on both sides, and selling Korean stocks adds a securities transaction tax. These costs look small once, but they pile up quickly the more often you trade, so the same trade record gives different results depending on whether costs are included. The catch is that these numbers are not fixed. Commissions vary by broker, promotion and order channel, and the tax rate can change from year to year with policy. So treat cost settings in paper trading not as the right answer but as assumptions you set yourself. Check your broker's fee schedule and the tax rate for this year, enter them, and note the date you changed them. US stocks also carry costs often left out of paper trading, such as currency spreads and regulatory fees, and dividends and capital gains tax usually aren't calculated either. See the guide on the types of taxes on stocks, and the one on how frequent trading leaks money, alongside this one.

Keeping KRW and USD accounts separate

If you practice Korean and US stocks together, it is better to keep the won and dollar accounts separate than to blend them into one number. Profit and loss on US stocks combines the change in the dollar share price and the change in the dollar-won exchange rate. You can be at a loss in dollars yet look profitable in won because the rate rose, or the reverse. Looking only at the two accounts summed in won, you cannot tell whether your judgment was right or the exchange rate helped. So judge each position within its own currency and treat the combined figure as a reference only. When doing a simulated exchange, remember that real conversions carry a spread and have set hours. The moment you convert won to dollars is itself a decision, so recording the date and rate makes it easier to split profit and loss later. The guide on how exchange rates affect overseas stock returns goes into more detail.

Common mistakes in stock paper trading

Most mistakes in stock paper trading come from forgetting constraints that exist in the real market. If you leave out conditions you cannot avoid in reality, such as closed hours, late quotes and tax on sales, the habits you practice will not carry over to a real account. The better a trade turned out, the more worth it is to check that it didn't benefit from leaving one of these out. Check now and then whether any item below applies to your practice, and if one does, build it into the rules for the next period.

• Expecting a market order placed at night while the market is closed to fill near the previous close
• Trusting delayed prices as live and repeating short-term trades
• Trading Korean stocks often with the transaction tax left at zero
• Mistaking the exchange-rate effect for skill by looking only at the won total
• Trading quantities several times larger than you would really use because the balance is virtual
• Resetting the account often to erase losing records

Practicing with this site's Stock Paper Trading

This site's Stock Paper Trading starts with a virtual 10 million won and a virtual 10,000 dollars. The won account trades Korean stocks and ETFs such as Samsung Electronics and SK Hynix, the dollar account trades US stocks and ETFs, and you can do simulated conversions between them at the dollar-won rate. Market and limit orders fill only while the regular session is open; a market order placed while the market is closed waits as 'waiting for open' and fills at the first new quote after the open. Limit orders fill when a polled price reaches them and can be cancelled from open orders. A preview before ordering shows the fill price, commission, tax and estimated profit or loss, and the commission and Korean sell-side transaction tax can be changed in settings. The tax defaults to 0%, so enter it yourself before selling Korean stocks. Quotes come from Yahoo Finance via the site's server, Korean stocks are about 20 minutes late, and extended hours are not covered. Records stay on this device and can be backed up as JSON. To test the same rules on past prices first, use the Stock Strategy Backtester; to keep quotes on one screen, use My Stock Board.

Checklist before moving to small real positions

Keeping your rules consistently in paper trading is not by itself a reason to put real money in at size. The biggest differences between paper and real are emotion and execution, so first experience the same rules with a very small amount whose loss would not affect your life. Move on only after checking every item below, and even after moving, record the gap between expected and actual fill prices and how it felt when you actually had to execute a stop. If you break your rules often in real trading, it is better to go back to paper than to increase the amount.

• You confirmed in your journal that no trades broke the rules during the practice period
• You looked at results with commission and tax set to your real broker and this year's rate
• You checked several times what price 'waiting for open' orders filled at
• You can explain the profit and loss of the won and dollar accounts separately
• You checked the real account's order screen and extended-hours settings in advance
• You set the first real amount at a very small level you can afford to lose

Limits and disclaimer

Paper trading uses real prices, but it is not the real market. Elements such as the order book, queue position, partial fills, slippage, daily price limits and currency spreads are missing or simplified, so real results for the same trades can differ. Quotes can arrive late or drop out from the data provider, and holidays and shortened sessions may be handled differently from reality. Commissions and tax rates change with brokers and policy, so check official notices from your broker and the relevant authorities before placing real orders. Profits in paper trading do not guarantee real profits. This guide explains how to use paper trading; it is not investment advice and does not suggest buying or selling any stock. Make real decisions yourself based on your own situation.