Stock Market Simulators: Learn How Virtual Trading Works

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Updated on Tuesday, December 11, 2018

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Flight simulators, business simulators, skydiving simulators — they all help you get a feel for what the real thing is like when it’s time to act. Stock market simulators do the same, allowing investors to get in the game with risk-free virtual trading. Here’s how these simulators work, where you can find them and how they just might improve your trading.

What is a stock market simulator?

A stock market simulator or a stock trading simulator offers traders a chance to invest virtually in real stocks on the exchange. Usually, traders can buy and sell whichever securities they’d like, and they often compete against other traders to earn the most profit within a specified time. Sometimes, the site offering the virtual trading stakes traders with an initial virtual bankroll as they hit the market.

Stock market simulators often are used as a contest or game among friends. In this scenario, the stock picking is often low-key, and fun is just as much a part of the mix as winning. You might leave the contest with a hot stock idea, but a good time is the goal for many players.

But in other scenarios, traders use stock market simulators for much more serious ends, putting them to work before they put their real money out in the market. They test their investing ideas — whether a strategy can work and what it might return in profit. Traders also use these simulators to test their emotional responses to earning and losing money. Temperament is one of the most important success factor for a trader, and simulators may help them calibrate their emotions.

Where to find stock market simulators

To get started, you’ll need to find a website, app or service that offers a simulator. Brokers’ sites tend to offer simulators that are better suited to testing ideas alone, while financial sites offer a more social, gamelike atmosphere for their simulators.

On financial sites, you’ll likely be asked to create an account before you can begin, but from there, it’s usually free. Brokers may require you to open an account before accessing their simulators, which they also call a “demo” or “paper trading.”

Financial sites

You can find a variety of different simulators on the following sites:

  • Investopedia: After registering for the Investopedia Stock Simulator, you’ll be able to join games created by Investopedia or its members, or you can create one yourself. Each game offers customized settings that will allow players to trade on margin, short sell and trade options if desired. When you’re ready to trade, you enter the order almost as you would at a real broker.

Investopedia allows you to set up watchlists and has a pair of stock screens that allow you to sift through the market. A portfolio page tracks your holdings and tallies up your assets. It even ranks your performance against other players in your game. If you’re new to stocks, it offers helpful tutorials to help you navigate the process.

  • Virtual Stock Exchange: This game is offered by MarketWatch, and after an obligatory registration, you can be off and running in one of more than 40,000 games or design your own. By default, you can buy virtually any ticker on an American exchange, or you can narrow down the choices by index, exchange or security type (stock, mutual fund or exchange-traded fund). You’ll set how much money players start with and whether they’ll be able to trade on margin and short sell. From there, you’ll set the game length and be on your way.

Virtual Stock Exchange is a well-produced simulator, and from your player page, you can pull up stocks by typing in the ticker. A pop-up will show you the stock’s chart, and you can move quickly to the stock’s full page on MarketWatch. If you’re ready to trade, hit the trade button, and you can efficiently enter your order with a slider, no typing needed. Your player page also details your portfolio and a watchlist for later research.

  • Wealthbase: This new kid on the street is a slickly designed and smooth-as-butter stock picker that gets you and your trader friends in the game quickly. A clean interface allows you to navigate intuitively, and you can pick from all stocks and ETFs trading on U.S. exchanges. A social feed (a la Facebook) publishes the actions of gamers, while daily progress updates keep you engaged and informed. A ticker search brings up charts and a news feed, while a portfolio page tracks picks. This is social media meets simulator.

Broker sites

Some broker sites also offer simulators that make it appear as if you’re really in the market — with no one by your side — and that’s the experience you want to mimic in order to test your temperament.

  • TD Ameritrade: This online broker calls its stock trading simulator paperMoney, and it’s part of the company’s thinkorswim trading platform. You’ll need to register with the broker (or have an account there) before you can download the program. After installing it, your screen is filled with the trading platform, and you will start with $200,000 in virtual money.

It can be overwhelming at first. There are just so many options, and you have the full suite of tools here. It’s best suited for professionals who use these tools, follow the streaming news, and monitor markets and stocks simultaneously. A few clicks will get you to any stock’s page, with detailed financials and ratings. From there, feel free to test out any strategy you want.

  • TradeStation: This online broker also offers a demo account called the TradeStation Simulator after you’ve registered. Like TD Ameritrade, TradeStation offers a fully featured virtual account. You can start with any amount of cash you’d like and then trade just as you would in real life. You’ll have a complete view of your day’s activity, including profit and loss. You also can automate trading strategies and test them with live data to see if they work.

Virtual trading accounts at brokers are as much about familiarizing yourself with the trading platform as they are about learning to trade.

So what are the upsides and downsides of virtual trading?

Virtual trading can be a great way to get a feel for the market, especially if you’re just starting out. There’s a lot to learn, so it’s best to learn as much as you can inside the safe confines of a stock market simulator, where you can’t lose any money. Simulators can be an excellent way to help you practice before you go out to buy your first stock.

Simulators also allow you to try out different strategies without fear of failure. Did you sell that stock accidentally when you meant to buy? Did the stock you purchased just tank? No problem!

While simulators can show you how to trade in a real environment, there are limits to their ability to help you calibrate your reactions. When real money is on the line, your emotions and actions change. You’ll always react differently to gains and losses when it’s real money. So when you come out of the simulator cool as a cucumber, don’t expect that calm to last forever. Like the rest of life, there are just some things practice will never fully prepare you for.

Two more downsides to virtual trading: commissions and taxes. Virtual trading allows you to trade without feeling the pinch of trading commissions, so it’s easy to get the feel that they’re inconsequential, but overtrading can really run up your expenses. Similarly, virtual trading allows you to avoid another real-world expense: taxes on your gains. Inside a simulator, it can be easy to forget there are actual negative financial consequences to trading stocks.

Bottom line

Stock market simulators are a great way to become familiar with how the market works, pick up a few stock ideas and have a good time. They’re also useful for learning the ins and outs of a broker’s trading platform before putting up real money. But whether you’re ready to invest real money or virtual, be sure to read MagnifyMoney’s guide on how to invest in stocks.

The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.