How to Practice Investing in Stocks

Set up an online practice trading account to learn stock investing.

Before investing real money into the stock market it is a good idea to trade in a simulated account using imaginary money. In the sim account you can get a feel how well your stock picks perform and how the trade entry systems work for the different online brokers. Some simulated accounts are for a limited time and other brokers will allow you to have a sim or paper trading account for an unlimited period of time if you also have a live brokerage account.

Instructions

1. Review the services and commission schedules of online stock brokers that offer paper trading. The brokers that offer practice trading are the ones geared toward day traders or options traders. Some brokers that offer virtual trading are TradeMonster, optionsXpress and ThinkorSwim. Although these sites target options traders, their practice trading systems also allow stock investing.

2. Open a practice trading account with the broker you selected. The simulated accounts will give you access to the same investing and trading tools as a regular investment account.

3. Practice buying and selling stocks using the broker's paper trading system. The brokers will allow you to use the practice trading system for 30 to 90 days without opening a regular investment account.

Tips & Warnings

• The online brokers who offer practice stock and option trading accounts also offer free online seminars on how to use their systems and trading tools. These seminars can be great learning resources for new stock market investors.

• To learn more about stock picking and compare your practice stock investment account, set up a portfolio at an online portfolio site like Market Guru or Motley Fool CAPS.

• If you cannot find out if a broker offers practice accounts call them up and ask.

• Investing real money is different that practice investing. When you are ready to open a real brokerage account, start small and analyze your emotional response to making and losing money in the stock market.

References

• Investopedia: Paper Trade
• Learning Markets: The Importance of Paper Trading

Resources

• Market Guru
• Motley Fool CAPS