What is virtual trading in stock market?

Updated: Wednesday, April 24, 2013, 12:38 [IST]

Many investors have burnt their fingers while investing in stock market. Primary reason for this is lack of knowledge and the presumption that making money in stock market is as easy as buying low and selling high. Before investing people do not spend time in understanding the market dynamics and fundamental reasons behind price movements. The only way you can make money in stock market is by gaining knowledge and controlling your emotions.

One very interesting idea has popped up in recent past backed by the power of internet and computing which helps you in overcoming the hurdle of knowledge and emotional control i.e. Virtual Trading or Paper Trading. This program is designed especially for beginners but professionals also use it for testing new methodologies.

Virtual trading teaches you the nitty-gritty of stock market in a step-by-step fashion so that you know exactly when, where, and how much to invest. It has the potential to equip you with the right tools and right information from the very beginning, up to when you're ready to do your first real trade. Let's figure out what virtual trading is and how it can help equity investors.

What is Virtual Trading?

Virtual trading is a unique stock market simulator program, which helps you in learning the nuances of trading and investing in live stock market without risking any real money. It duplicates features of a live stock market on a computer so that a would-be investor can practice trading stocks without any financial risk. You can practise investing in live share market with Virtual Money and can Buy/Sell equity or derivative contracts in a virtual environment using this tool.

Benefits of Virtual Trading

There are some remarkable benefits of virtual trading which help you in becoming a smart investor. Read on the benefits to know why you could not have chosen a simpler way to understand the Stock Market.

Platform for practical learning - Virtual trading is simple and provides you with an environment which is quite similar to real stock market. You can very easily compare your performance as an investor. You can test new strategies, learn the common terms used in stock market, do fundamental analysis and take calls on the basis of technical analysis.

Risk free - There is no real fear of losing money as every trade is taken using virtual money. You can allocate some virtual amount in your portfolio and trade using this amount. Virtual money doesn't have any effect on your performance indicators as they will be comparable to real environment.
Helps in understanding the Market dynamics - Using this platform you can understand the market dynamics like the effect of news flow on stock prices, effect of global events, etc. You can also test some whacky ideas which you cannot test in real environment as it might be too risky.

For beginner or for a professional

This tool is excellent for beginners and it's recommended that before taking a real trade they should practice virtual trading for at least one year. One year might sound long but in stock market it's treated as short term. I am recommending one year, since in a span of one year, you can witness two, three upswings and down swings of market. Performance comparisons during this period will really help you grow as a better investor.

You will be surprised to know that professional investors use this tool more often than beginners. They need this tool to test new strategies before employing them in real market. So even if you are a professional this tool can be of great use to you as you can test new strategies without any financial risk. If you want to take a plunge into more risky trades like futures and options, virtual trading comes to your rescue by providing ideal environment for practicing.

Word of Caution

Stock market simulators are good for beginners, but it cannot replace an experienced trainer as sometimes the performance indicators can be misleading, giving the beginner a wrong impression that live trading is a piece of cake. Virtual trading is necessary but to keep false sense of confidence at bay needs guidance and insight from an experienced trainer. So it's recommended to consult an experienced trader who can testify the results of your trade.

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