How to Simulate Stock Trading to Learn the Stock Market

by Melanie J. Martin

Simulating stock trading before you invest in stocks prepares you to make wise decisions with your money. Anyone can simulate stock trading with an easy-to-use online tool. In fact, teachers often use such tools to teach their students the fundamentals of investing in a fun, stress-free way. Ultimately such a program will help you to become a more confident and savvy investor.

1. Choose the program you'll use for your mock trades. In "Forbes" magazine, finance writer Anna Vander Broek recommends the free program WeSeed, which introduces beginners to the stock market. Other programs include Young Money and Stock Smarts, among others. Whichever program you choose, make sure it simulates the conditions of the real stock market in real time so you'll accurately observe how your investments would perform.

2. Build your portfolio, filling it with companies you have researched by reading expert opinions and performance review charts. If you're just beginning to select your stocks, your simulator program may allow you to search for stocks by subject. Target stocks you're already familiar with as a consumer or investor, because they're likely safer investments than new upstarts or lesser-known companies.

3. Observe how your stocks perform over the course of at least one quarter. Weed out any stocks that you've deemed poor performers, and add any new stocks in which you feel fairly confident. Continue to observe how your investments perform. Track your ratings in comparison to those of other users if your program allows you to do so. The Stock Smarts program shows the most successful (as well as least successful) 100 users, for example, allowing users to monitor their own stock savvy.

4. As you play the stock market via your online game, continue to read analyses of your chosen stocks and others that you're considering. You'll be ready to graduate to the real stock market when you can present a clear rationale for why you feel confident investing in your list of stocks. Keep your number of stocks manageable, striviving for a final cut of no more than 10, so you have the time and energy to become deeply familiar with each one.

About the Author

Melanie J. Martin specializes in environmental issues and sustainable living. Her work has appeared in venues such as the Environmental News Network, "Ocean" magazine and "GREEN Retailer." Martin holds a Master of Arts in English.

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