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Want to Be an Active Investor? Try a Fantasy Stock Market Game First!

Filed in Investing 101 5 comments

So you want to be an active investor?

Maybe you think you have what it takes to cash in like the daytraders from the late 1990s trading those high flying tech stocks.  Or perhaps you think you can ride the coattails of those evil oil speculators that pushed light sweet crude up to $147/barrel back in 2008.

You think it’s going to be so easy.  Don’t ya?

I have a secret for you… nothing is easy when it comes to making money.  Especially in the stock market!

And the fact that you think it’s going to be so easy makes me very happy.  After all, someone needs to cash out my shares on the breaking news trade or the fear trade has everyone in a panic.

Practice the Game Before Playing the Game

Excuse my callous sarcasm above, but for the uninitiated, the stock market is no different than a casino.  Just like Las Vegas, Wall Street is abuzz with flashing lights, hidden agendas and people that want you to throw your money on the table.

And getting a piece of the action is so easy that you don’t even have to leave your bedroom.  Just log into your online broker or maybe even trade a few stocks on your mobile phone.

After all, if a talking baby can do it… then why can’t you?

[Email and RSS Readers may need to click through to view eTrade Baby video]

Sure, it’s a nice sales pitch and I’m sure many people have been suckered in since online brokers became all the rage back in the late 1990s.

But actively trading stocks is no different than any other profession:  if you want to be successful, you have to practice before you can play in the big game.

Fantasy Stock Market Games and Simulations

The best place you can learn the basics of trading is by using stock market simulators.  Much like a fantasy baseball team, you can make the necessary buy and sell orders as you see fit.

There are many stock market simulators on the Internet where you can create your own fantasy stock market game or pretend you’re running a million dollar mutual fund.  You can even pretend to be a hot shot daytrader and trade dozens of times a day.

My personal favorites are:

  1. Wall Street Survivor.  This is a free website where you trade an imaginary portfolio until your heart is content.  You can try, and hopefully perfect, any trading strategy that you wish to implement.  Their software is perfect for anyone who wants to learn how to buy and sell stocks on the stock market without using their own money.  They recently added options trading, so you might even find me dabbling with a few option strategies from time to time if you checkout my profile.
  2. Marketocracy.  This is another free website that has been around for some time.  You will be constrained with mutual fund manager rules (60% invested at all times, no short sales, etc), but it’s a very good site for anyone who wants to learn trading while still using a traditional buy & hold strategy.

Just to give you an idea of how it works and what it looks like, I’ve included a screenshot of my portfolio.


Final Words of Wisdom

If you want to go jump in the deep end of the pool without learning how to swim, be my guest.  It’s a free country.

But if you’re really serious about becoming an active trader, the absolute worst thing you can do (in my humble opinion) is to mix it up with the big boys without learning how to market works, much less why the stocks go up and down after you buy them.

In the end, you’ll likely walk away with a portfolio half of it’s original value and a “sour” view of the stock market until you’re ready to belly up to the blackjack table once again.

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Posted by CJ   @   20 May 2009 5 comments
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May 21, 2009
11:27 am
#1 SJ :

Aww… I enjoy that commercial =)

My friend does enjoy BAC in real life lol…

The biggest problem I see with things like this is developing hubris; esp since you aren’t training under normal conditions.

It can be like practicing swimming in the dead sea (when salt makes it trivial ;)) then jumping into an icky pool w/ lil’ kids peeing.

But ::ahem:: I agree it teaches good basics; just thhat there is a need to keep things in prospective; more emotions, etc.

Oct 21, 2009
11:46 pm

A few others that might be of interest to you:

Umoo and UpDown

Stock market games are good for learning the mechanics of trading, but they’re not good at teaching you about discipline and money management (the real keys to success).

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