Trading Simulators (aka paper trading, virtual trading, stock market games) lets you practice investing, trading, gain experience, and learn the game without risking your life savings.  Would you step into a game you’ve just learned and bet your life savings on winning?  Maybe if you’re a gambling addict, but the rest of us would only try that if we’re good at the game.  Why risk real money learning about the investing game? Trading simulators lets you practice as long as you want, make all the mistakes in the world, and gain experience for no cost and no stress.  Most people can’t live off of their investments is losing too much money trying to learn the game.  But as you can see, practicing with trading simulators, along with a trading coach and investment books, there’s no reason to lose a lot of money to learn the game.

Paper trading (and/or trading simulators) are extremely useful for practicing new strategies, refining your technique and approach, and learning about new facets of trading the market. However, there are a few different styles of paper trading simulators: Paper trading platforms and strategy & technique simulators. Paper trading platforms are the regular paper trading tools that you can use to practice investing in the market. Strategy & technique simulators can provide pseudo data in “real-time” to help you understand trends, techniques and strategies.

Most trading simulators are free, so don’t settle for simple “stock market games” that aren’t realistic.  Like when first learning to drive, you want to practice in the car you’ll be driving.  You want to know exactly where all the breaks, lights, and buttons are and how they work.  Many online brokers and trading platforms have trading simulators, so consider starting with those.  (Read our trading platforms guide for more on features that are important when trading real money, but “stock market games” won’t offer.)

The Basics

Here are the basics of trading simulators that you should know.

  1. Experience. Understand that experience is everything. This is what you are trying to develop when using any paper trading tool. The more you practice with your paper trading system, and understand the relationships that exist in asset class movements, the more experienced you will be in your trade tactics. Whether you’re a beginner or a seasoned investor, paper trading is an effective way to test out your strategies, and gain experience in any asset class.
  2. Trading Style. Whether you’re a long-term stock investor or a short-term forex trader, it’s incredibly easy to practice trading techniques. For long-term investors, paper trading might not be suitable for practicing your strategies (since they develop over years), but since temporally speaking, techniques are somewhat transparent, it makes it easy to practice pattern recognition, trends, etc on shorter-term trades, and take that knowledge to your longer term investments.
  3. Risk Appetite. Most traders have a lack of confidence in their trading strategies, and that translates to a high risk aversion. These trading simulators help. Practice, practice, practice, and you will soon refine your strategies into something that consistently makes you money, which you can then be more confident about in your real trading accounts.
  4. Asset Class. Each asset class has their own types of trading simulators that create a sort of mock asset trading platform.  Depending upon the type of asset class, various brokers, platforms, mentoring programs and charting software each have their trading simulators that can be more or less specific to a type of asset. MarketHeist reviews and summaries will identify the particular strengths and weaknesses of each paper trading application to help you find the one best suited for your investing style.

The Styles

Paper Trading Platforms

  • Types: Real-time, Delayed-time, Back-Test Strategy
  • Pros: Useful for learning & testing strategies, Easy to use, Learn platform
  • Cons: Most are delayed time -- hard to day trade or swing trade with them, Some only offer a subset of tools of full platform, No “real” pressure of trading money
  • Summary: Incredibly useful for learning strategies as well as getting a feel for different types of trading platforms, but keep in mind that at the end of the day, it’s still just trading fake money.

Strategy & Technique Simulators

  • Type: Back-Testing Based On Data, Equity and/or Derivatives Setups
  • Pros: Great for Developing Algorithms or Practicing Trading Techniques, Increases market timing proficiency
  • Cons: Historical or artificial data used, not real-time or live trading, mostly useful for strategy development rather than market learning, no/limited trading execution practice
  • Summary: Great for back-testing new strategies or to learn new trading techniques, but no timing practice or accounting for trader execution error

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