An investor would be well advised to have an investment system in the first place. Then the investor would be required to test his system through stock market simulation. This would require the investor to conduct dry runs using pen and paper. In fact, in today's time and age it would be more appropriate to use a personal computer, to bring in a certain level of efficiency to this exercise.
The investment system would have aspects drawn from both fundamental and technical analysis. However, at the testing stage this system is quite like a game. Where the investor has no exposure to risk, as he would incur no real loss in case of an error of judgment in his investment decisions.
Stock market simulation is used by investors to practice their investment skills, before they actually invest their financial resources in the stock market in real time. Stock market simulators are also used by banks and large financial organizations to train their personnel.
These stock market simulators are also available in the form of a game, which does not require you to have any prior knowledge of the stock market or investment. Given below is how the stock market simulator usually works:
The participant is first required to register. In some cases they may also be required to pay a certain fee.
Participants are given an initial sum of "virtual" money, to invest in stocks of their choice.
Participants then build a portfolio of stocks by buying and selling equity shares of various companies.
Most stock market simulators use real time market data, of both price movement and volume of shares traded.
The objective of these stock market simulators is to help you learn how to increase the value of your portfolio. That is, the value of your portfolio is greater than when you started the exercise or game; and also the value of your portfolio is better than the other participants.
While selecting a stock market simulator (or simulation game), the investor may keep the following in mind to make a better decision:
1. Select a stock market simulator which comes with impeccable recommendations from banks, financial institutions and corporate bodies who use them extensively.
2. Select a stock market simulator which is comprehensive. Firstly, it should be easily implement-able in various financial and investment classes. And secondly, it should have features for trading stocks, options, futures and mutual funds; to enable the participant to get a feel of the real investment world.
3. Select a stock market simulator that gives valuable, reliable and realistic trading simulations.
4. Select a stock market simulator which is of reasonable price or fee to the participants.
5. Select a stock market simulator which has the capability to test various investment strategies.
6. Select a stock market simulator that has free customer care support through both toll free telephone and email.
7. Select a stock market simulator that is easy to learn and use.
The investor would appreciate, that stock market simulation is a training tool and would help you with respect to responses required on your part when faced with situations in the stock markets in real time; when you have actually invested your financial resources and hard earned savings.