If you’re new to stock picking, taking the leap to risk your hard-earned money can be intimidating. That’s where “paper trading” becomes a valuable tool.
An enduring financial adage states that “it takes money to make money,” and for many, the stock market serves as a lucrative and well-established avenue to grow their capital.
While investing in passive, low-cost stock market mutual funds or ETFs tracking major indices is a reliable strategy, it has its drawbacks. Firstly, you can’t outperform the index you’re following, and secondly, it might be less exciting.
So, if you’re considering venturing into individual stock selection, the thought of risking real money can be daunting, especially if you’re a beginner. This is where “paper trading” comes into play.
What is Paper Trading?
Paper trading involves simulating your investment strategy using fake money and monitoring the results. This allows you to assess the success of your ideas before committing real capital.
Opening an account for paper trading is beneficial not only for short-term day traders testing strategies but also for cautious buy-and-hold investors.
Here are five top paper trading sites and stock market simulators:
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MarketWatch:
- Referred to as the “virtual stock exchange,” MarketWatch’s platform is widely used by individual investors, beginners, and students.
- It allows users to create or join games, competing to achieve the best returns with imaginary money.
- MarketWatch offers the option to invest in over 5,000 public companies across various exchanges.
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Investopedia:
- Similar to MarketWatch, Investopedia provides a free stock market simulator.
- In addition to stocks and ETFs, users can also paper trade stock options, adding complexity to the simulation.
- The platform includes an educational section where users can learn about stocks, trading basics, and options strategies.
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Finviz:
- While not explicitly a stock simulator, Finviz’s portfolio-tracking feature allows users to monitor the performance of their picks without real money.
- Users can create virtual portfolios with up to 50 different symbols, and the platform offers a stock screener for building themed portfolios.
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Thinkorswim:
- Thinkorswim, originally from TD Ameritrade and now under Charles Schwab, provides a highly acclaimed online trading software.
- It offers paper trading (paperMoney) for stocks, ETFs, mutual funds, and options within a sophisticated interface.
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eToro:
- eToro offers a user-friendly paper trading experience, allowing users to experiment with different online brokerages and trading strategies.
- The platform is particularly suitable for beginners and offers a CopyTrader feature for mimicking the trades of successful investors.
While each platform has its strengths and limitations, they collectively serve as valuable tools for individuals looking to hone their investing skills without risking real money.