Virtual Trading: How Stock Market Simulators Work

Brokers, Investing, Investing Strategy
Virtual Trading: A Guide to Stock Market Simulators

There’s nothing wrong with a little friendly investing competition. Getting in on a pickup game is as easy as downloading one of the dozens of virtual stock-trading simulator apps and racing to see who multiplies their Monopoly money the most before the clock runs down.

It’s all good fun — a risk-free way for investors to work out those daredevil day-trading urges, claim bragging rights and learn a little bit about how investing works. That is, as long as you recognize that a stock-picking game isn’t truly like investing in the real world.

Nothing like the (almost) real thing

In the real world, investors aren’t competing against other players’ returns; “winning” is about equaling or exceeding the performance of a benchmark index. Success isn’t determined over weeks or months but years. And, of course, there’s actual cash on the line.

For a virtual-trading practice environment that’s close to the real thing, you can’t get much better than the simulated investing platforms that many online brokers offer.

These practice accounts, sometimes called paper trading accounts, typically mirror the broker’s working trading platform. Most are free, although they may require you to set up an account. The best give test drivers access to a fully functioning setup with the same tools that active customers use: watch lists, stock screens, research and live or slightly delayed data feeds.

Here’s a sampling of the virtual trading platforms that brokers offer:

Virtual stock trading platforms

BrokerAccount setup and requirementsHow it worksHighlightsGood to know
Interactive Brokers paper trading account
  • Free to customers with a regular trading account
  • $10,000 account minimum
  • Desktop platform has the full lineup of tools offered on the broker’s TraderWorkstation platform
  • Account functions are limited
  • Focuses on advanced trading strategies and products
  • Simulates multiple exchanges
The simulator is available only to IB customers, but IB offers free demos of its TraderWorkstation and WebTrader platforms
OptionsXpress Virtual TradeOpen an account ($0 minimum) for free access. Charles Schwab owns OptionsXpress, so Schwab customers also have access to virtual trading. Web-based virtual platform for trading stocks, options and futures in a single simulated portfolio
  • Real-time quotes and charts
  • More than 40 trading tools
  • Advanced order capabilities
OptionsXpress powers the simulated platform that the Chicago Board Options Exchange offers for educational purposes.
ScottradeELITE virtual trading system
  • 30-day demo account for ScottradeELITE
  • You must open a Scottrade account ($2,500 minimum deposit) and email a request to use the demo platform
Windows- and Mac-based desktop tool that mimics the broker’s most advanced platformProvides limited functionality to platform tools that let investors plot entry and exit signals, replay market shifts and learn to customize technical setupsAccess to the live ScottradeELITE platform requires a primary account balance of $25,000 or more and nine or more trades within past three months.
TD Ameritrade's thinkorswim
  • Free 60-day trial to paperMoney, the virtual version of TD’s thinkorswim platform for active traders
  • Requires registration
  • Desktop-based platform
  • Virtual individual retirement account is "funded” with $100,000 in practice money
  • Includes foreign exchange and futures fake trading
  • Allows testing of advanced orders and back testing
  • Includes a virtual margin account: another $100,000 to fake borrow, with interest, to speculate
The thinkorswim platform is aimed at advanced and frequent traders. The Trade Architect platform, which doesn't have a virtual mirror practice account, is better suited to beginners.
TradeStation simulatorFree for TradeStation clients ($5,000 account minimum)
  • Desktop-based simulator
  • Some features are limited based on the customer’s subscriptions to feeds and data
  • Includes strategy automation, advanced orders and alternative market types
  • You can reset your account balances at any time
Features on the simulated platform are based on customers' subscriptions to feeds and data.

Source: Broker websites

If you’re interested in checking out a broker that doesn’t offer a paper trading platform for potential customers, or if the qualifications for signing up are too onerous, contact customer service and ask if it can provide temporary access to a demo account.

More than just trading fake money

Of course, brokers hope that people who sign up for virtual stock trading accounts eventually convert from dabblers to paying customers. But there’s no obligation — unless, of course, you have to sign up for an account to get access to the paper trading program. Even if the relationship remains superficial and temporary, you can get a lot out of the experience, including:

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.

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 wherever you can suffer the least financial damage.

The chance to 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, like shorting stocks and trading options, and more sophisticated investing fare such as futures and commodities and foreign currencies (forex).

The chance to practice deep breathing exercises for trying times: 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 movies featuring vintage dolls that come to life and carry out evil capers after dark. The emotions you experience while investing in la-la land provide a preview of what to expect when you encounter the real and unavoidable market ups and downs.

Get ready to invest for real

Got a dream team of stocks in a virtual portfolio? Here are some resources to review before you start trading for real: