Anyone not familiar with the stock market and trading may be hesitant to jump in and try it. This fear mainly comes from the fact that real money is involved, and not knowing the ropes can get you tied up very quickly. To help would-be investors gain more confidence, practice stock trading has risen in popularity. Practice stock trading allows you to use a virtual sum of money to make realistic investments and learn from valuable experience.
There are a number of sites which offer practice stock trading. Some are financial sites, others are brokerage firm sites and others are even independent practice stock trading sites. Most all of these sites are free to sign up, allow users to play on their own or against other users, and eliminate that "real money" risk. The best sites to get real-world experience from, however, are those which offer simulations of real trading platforms, markets and companies.
These practice stock trading sites are available for all manner of trading, including day trading. This way you can gain experience by investing the way you plan to in real life, and by investing the areas you plan to in real life. Those who are not quite sure how they want to invest are encouraged to try several different practice stock trading markets and strategies to see what works best for them. Some of these sites even offer cash prizes or other gifts to top players.
The major key to relating practice stock trading to real world trading is to treat your practice investments and portfolios as if they were real. Only make practice stock trading investments you believe you would make in real life, and monitor your progress as frequently as you would if your actual money was at play. This trains you for the jump from practice stock trading to actual investing much more quickly than not taking things seriously.
When trying to decide what companies to invest in, start with companies and brands you are familiar with. If you are loyal to one brand of clothing, or frequent one store, you will feel more comfortable investing in them. Take some advice from investing king Warren Buffet, who has been quoted saying he only invests in what he understands. When a wild card company involved with cattle farming in Brazil comes up, you can safely dismiss it (unless you happen to know something about that industry.)
Finally, keep a log of things you learn as you practice stock trading. As you discover little tips and tricks that work well, or mishaps, which ruin everything, write them down. Take note of the type of investments and investing style you love and ones you would like to avoid. This will help you build that all-important stock trading system when you move on from practice stock trading.
About the Author:
Max Hunter is the Editor-in-Chief of Trader Critique. Trader Critique is a blog, review and resource site for stock, forex and commodity traders. http://www.tradercritique.com