Stock market simulator is a very good tool for anybody who learns to trade the stocks on equity exchanges. This special tool allows to make virtual stock trades without risking real money.
Such market simulations can be used for two main purposes.
You can :
- check qualities of any trading strategy
- check features of any stock trade software
The first option is using a stock market simulator for testing trading software and a platform provided by a selected broker. It can be one part of process that should lead to choosing the best online broker for you.
Make virtual stock trades with stock market simulator
It is good to use this market simulator every day during a testing period. A simulator can be used for practical testing like how to enter orders, using a different orders like stop orders or trailing stop orders. Some of these simulators also provide charting features so it’s good to test them too.
This type of simulator is often known as demo platform or demo account. If you are looking for a new broker or if you plan to change trading platform, then I recommned to test new platform before opening an account or buying new trading software.
Here’s an example of a trading simulator from a discount online brokerage house, Interactive Brokers
A trading simulator for everyday strategy simulation
Another possibility is to use some software for virtual stock trading. You could test your ideas on historical data by online simulation of any market strategy.
You have to define conditions describing your own market strategy and put them into the trade simulator. Such simulators could be integrated also into analytic software.
Amibroker also has a feature that allows you to define your technical strategy and then run virtual simulation with historical data to check out how such a strategy worked in the past. Although past results do not guarantee future profits, if you see that your strategy worked in the past, your chances to be profitable in the future are much better.
Such an online simulation of your trades is known as back-testing. Here is sample report of back-testing in AmiBroker: