Best Stock Market Simulators: What They Are and How They Work

There’s nothing wrong with a little friendly investing competition. Especially when none of your actual money is on the line. Enter stock simulators.

What are stock simulators?

Stock market simulators allow you to invest with fake money, also known as "paper trading." Stock simulators let you test out different investing strategies, such as options trading.

Best stock market simulators

For a practice investing environment, you can’t get much better than the platforms offered by actual online brokerages.

Of the brokers that NerdWallet reviews, here are the top stock market simulators within paper trading accounts:

• TradeStation

• Schwab

• Interactive Brokers

» Want to compare? Check out the best brokers for paper trading

The best brokers give paper traders access to the same tools that active customers use: watch lists, stock screens, research and live or slightly delayed data feeds. Most stock market simulators are free, although they may require you to set up an account.

Why use a stock market simulator?

In the real world, investors aren’t competing against other players’ returns. “Winning” is about equaling or exceeding the performance of a benchmark index, which is a predetermined list of stocks, such as the S&P 500.

For example, if you’re picking and choosing individual stocks and after five years your average returns are less than the returns of the S&P 500, you may be better off investing in a low-cost index fund that tracks the S&P 500. However, if you manage to beat the index with your stock picks (mind you, research shows this is highly unlikely, even among professional investors), you could say you “outperformed” the stock market.

In the actual stock market, success isn’t determined over weeks or months, but years.

» Read more: How to begin stock trading

4 reasons to try a stock simulator

1. You’ll get a general investing education

Many of these platforms offer a very real education in investing, with a library of articles, tutorials, demos and, at some brokers, the chance to interact with an online community available to answer technical and investing questions. You can learn how long you want to hold and when and how you sell stocks. If you're just looking to research individual stocks, you may want to check out stock screeners.

2. It’s a safe space to learn the mechanics of placing trades and building a portfolio

There’s a reason student drivers take the wheel for the first time in abandoned parking lots. The best place to make all the rookie investing mistakes, such as mistyping ticker symbols or misunderstanding order types, is on a platform where real money isn't at stake.

3. You can test drive new investment strategies and types

Looking to expand your investing repertoire? Trying before you buy is especially important when venturing into new strategies, such as shorting stocks and trading options, and more sophisticated investing fare such as futures and commodities and foreign currencies (forex).

4. You’ll learn the importance of keeping emotions out of investing

As billionaire investor Warren Buffett says, one of the keys to being a successful investor is the ability to control the emotions that lead other investors astray. Even though investing decisions are less loaded when there’s no real money on the line, the brain doesn’t always fully absorb that concept — think haunted houses, roller coaster rides and scary movies.

Using a stock market simulator will provide a preview of what emotions to expect when you encounter the real market's unavoidable ups and downs.

» Want some investing practice? Try paper trading