The world of the financial markets is like an ocean full of opportunities. However, the same as this powerful element, it hides a lot of risks. Therefore, wouldn’t it be more reasonable to learn to swim in a calm pool, instead of diving into a roaring giant?
Stock market simulators. Practice trading without the risk
Stock market simulators usually represent effective online tools that help investors practice their trading skills, without the risk of losing their hard-earned money. Setting up an account, you get a particular amount of simulated money to make simulated investments.
Many stock market simulators provide a rather comprehensive functionality, similar to real trading platforms. They offer a wide range of available instruments, the opportunity to place stop/limit orders, open short and long positions, and much more.
Using simulators, traders can test not only their skills but check any trading strategies in practice virtually, without the risk of losing real money.
Benefits for trading newbies
If you’ve just started your trading journey, a stock market simulator is a good way to learn the basics of trading, and practice various trading techniques. You may learn how to read stock tables and intuitive charts, understand the effects of volatility, choose and try different trading strategies, etc.
Simulated trading can also become your financial tutor, providing analytical reviews, video guides, and up-to-date stock market information about major events that may influence stock prices.
Stock market simulators teach you how to conduct your own market research. Besides their main function of creating an illusion of a real trading experience, they provide real historical prices and trading data for different indices and industries, price-earning ratios and performance charts.
Benefits for experienced traders
You may think that simulated trading and various stock market simulators are made exclusively for unexperienced or amateur traders. However, they are not. Stock market simulators, especially those closely replicating the real markets' trading, can also bring value to mature investors.
Advanced traders get the valuable opportunity of trying various complicated and risky trading strategies safely. Eliminating the risk of losing large sums of money, they can refine the chosen technique and test it as long as they want before transferring their elaborations to real trading platforms.
Dress rehearsal before the trading premiere
As stock market simulators give you a chance to choose from the markets of your dreams, you can freely construct a portfolio and find out, whether you've already polished your trading skills enough to identify winning and losing instruments.
Simulated trading also provides you with an accurate portrait of you as a trader, constantly analysing your trading behaviour. You will clearly see how you react when the price goes unpredictably against you, and will find out, at what point it's better to close a trade to cut your losses or, vice versa, take off your profits, if the market is favourable.
Though everyone admits that stock market simulators are great tools for helping you step in into the real world of trading, some limitations are inevitable. For instance:
- There is no way to replicate real trading platforms completely
- Even the most advanced simulators offer fewer available instruments to trade
- They have even more restrictions than real financial markets
- Unlike the majority of real market trades, that are performed immediately, simulators often have a delay
- Trading with virtual money is not the same as risking your own funds. It's much easier to lose, when your money is kept safe
Play your way to real markets
Simulated trading can become a good way to develop your trading skills, augment your knowledge of the markets and raise your confidence before going live. Bearing in mind all the above mentioned limitations, stock market simulators can work as the perfect tool to practice trading. Just use them smartly to increase your trading skills.
Important: If you start trading real markets, please, bear in mind that many retail investors lose money. You should consider whether you can afford to take the risk.