Core terms
Paper trading
Placing simulated orders against real or replayed market data without real money. Simulated fills are usually better than live fills, so a paper result tends to overstate what the same decisions earn live.
A simulator tests decisions, not fills. Many simulators fill limit orders on the touch regardless of queue position, fill whole orders where a live book gives partial fills, ignore the price impact of your own size, fill stops at or near the stop price, keep filling through halts, allow shorts without a locate, and leave out fees and latency. Each of these makes the paper log look better than the same plan traded live.
A blunt correction is a slippage penalty fixed before a practice block starts, for example 1 cent on entries, 2 cents or more on stops, a share of passive touches counted as non-fills, and real per-share fees (Illustrative). Replay practice adds more setups per hour but removes the uncertainty of not knowing how the day ends.
What traders should verify
Practise the plan, hotkeys and logging in paper blocks with fixed definitions, apply the slippage penalty to every trade, and keep the paper log separate from real broker-synced trades. Compare penalised paper results with a small live sample before relying on them.
Do not conflate
Trader usage; there is no official definition, and simulator settings differ widely between platforms. A profitable paper log is not evidence of a live edge, especially in scalping, where the edge per trade can be a few cents.
Primary source
Trader usage: there is no official definition, and platforms and tools may calculate it differently.