I literally mean the online game of trading stocks. If you are new to the investment world and are thinking about trading some of your own money then practicing with fake money online is a great way to dip your toes in the water. I’ve used a few different websites for this but my favorites are wallstreetsurvivor.com and the trading simulator hosted by investopedia.com.
What’s so beautiful about practice trading is that the risk isn’t real, but the thrill of the game is. Practice trading also allows you to take risks that you might not otherwise do with your own money. Most of these simulators start you off with $100,000 of fake cash to trade. Depending on the platform you are using, there may be certain restrictions on your trading. Though I haven’t used the investopedia simulator for a while, I do know that when I did use it there was a rule about not being able to trade stocks with low trading volume. That’s to say the stocks with low amounts of trades being made per day. The simulator is thus protecting you from stocks that might be sketchy, and helping you learn that those kinds of trades in real life carry above average risk.
With wallstreetsurviver there is a 25% rule that restricts your stock purchasing power to 25% of your total cash available for trading. So if you are just starting out with your $100,000 then the game will prevent you from putting any more than $25,000 into one stock. This forces you to diversify your portfolio. Diversification is very important in the investment world, and this is a solid lesson to learn. For better or worse I tend to follow a 50% rule when I trade my real money.
I just started trading today on wallstreetsurvivor with an old account I had. I’m starting with $100,000 and every so often I will post updates here on my blog of my progress with the simulation. This is a big week for corporate earnings announcements and I have already placed two trades today for Apple and Microsoft, and I am still thinking over another trade on Tesla. Tesla is a more volatile stock and I’m not sure right now if they are worth the gamble even in the simulation world. There is certainly money to be made either way the stock goes…the only question is which way will it go? As it stands, the analysts of Wall Street seem very divided on Tesla. I don’t blame them because I’m divided myself.
At this time I have not yet set a goal to reach, but over the next few days I will do so. I will set a portfolio value that I would like to reach within a particular time frame. And from there we will just see if I reach it. I intend to set a very optimistic goal and reaching it will require a lot of risk. I played some simulations back in college and did quite well, but I took a lot of risk that I would never have taken in real life. So the end result when playing the game like that can be very mixed. I will do limited research on many of the trades I make due to my own time restrictions with work and the personal life, but I will at least do enough to convince myself that a trade is worth the risk.
Even if you aren’t looking to learn how to trade your own money I still advise trying one of these simulations just for fun. It’s a cool way to have fun with money that you may or may not ever have in real life, and you might just learn a few little things along the way that you never before knew.