Practice Trading in the stock market with Fake cash and Real Market Share Cost

There are several individuals who think about the difficult financial climate and think that the last thing on earth you would like to do is invest in the stock market. These folks couldn’t be more wrong. I have actually produced 3.2% earnings in four months. Contrast that with your bank account or various other financial CDs. There are places that let you learn out just how good you would be at trading and what to look out for with virtual money (ie: $0 actual worth = $0 actual risk).

Some places give you a pretend million, while different places give you a phony $100,000 to produce your own portfolio. They factor in trading commissions that would have to be accounted for in real life. They apply dividends to your virtual cash account when your stock pays dividends. With my fake account, I took a pretend 1 million dollars, I generated around $32,000. Of course, I genuinely gained $9,975.49 from Amazon.com stock (AMZN) last October. I locked in that interest by selling the stock before it declined again. And of course it was only bogus cash, but it was still exciting to see it happen. I also lost about as much cash in other stocks, but there are approaches to recover those losses. In fact the way I brought home so much from amazon.com stock, was by obtaining more of their shares when their stock price diminished.

Don’t let me talk up the stock market too much, though. The stock exchange should be considered BETTING. You can lose cash in a hurry. Even if I had a million dollars of actual money, I don’t think I would throw it around like I do in my bogus accounts. However, I recently started trading some stock (with what little I can scrounge up from garage sales, etc.). I am treating that cash like it doesn’t exist now that I bought the stocks. I know that I have to make $20 in profit on my stocks before I in fact start earning cash ($20 in brokerage fees for purchasing and selling once). That is one thing that is easier to do with thousands of (virtual) money at your disposal. I feel fairly confident that I will get something out of investing it. It’s better than buying a computer game that sits on my desk (un-played) for months on end until I can get around to playing it. After I invested actual cash in Barnes & Noble stock, last October, I scored $1.16 off of $50. Doesn’t appear to be much does it? That’s why brokerage firms routinely force you to open with $500-$1,000 deposit. If your trading cost is $10, then you have to attain enough profits on your stocks to recover those fees. If it weren’t for the trading fees, I would have brought home $21.16. However, this i a fixed expense. So if you trade 1,000 shares, you only need to earn 2 cents per share, much simpler than seeking to earn $5 per share (I only had 4 shares).

One of the best things about trading with “paper money” is that I actually have a feel for how my stocks are doing this week. Barnes and Noble (BKS) was selling pretty low the week prior to the 20% spike and I was showing a $3,000 virtual loss in my phony portfolio. I felt that eventually it would go up enough to cover those losses and maybe even earn extra cash (which it did thankfully). Part of my strategy is to pick organizations? that I can believe will come out of a stock price slump. If you don’t really believe that, then don’t trade the stocks. You have to be willing to tell yourself that the share price on businesses? like Coca-Cola, Oracle, etc. will eventually come out of a slump. That could be the worst part of picking a company that you don’t know anything about, you don’t have any faith in, etc. How are you going to stick to that stock through the tough times?

If you do well enough with your portfolio at some of these places, you can in fact win real cash. Before you get too excited, there are some serious competitors out there. Don’t go into those sites for that reason, but do go there to learn about stock trading. You may learn just badly your portfolio gets managed by “experts” who you let handle your retirement accounts. Don’t get me wrong. Monetary experts help you keep your head on straight when you want to get rid of all your shares when the stock market drops. They help remind you that you need to diversify. However, most retirement plans have you purchase stocks, mutual funds, etc. on a specific day of the month arbitrary asking prices. What if you bought Barnes & Noble the day after it gained 20%? It jumped 20% the week of 11/6/2009 and has since dropped more than that in price. What this means for investing misses out on, is purchasing low and selling high. If you ever ask an investor how to earn cash in the stock exchange, they will tell you to “buy low and sell high”. Some of them aren’t trying to be sarcastic or vague. They just understand the meaning a little better and how to in reality apply the rule when trading stocks. If you sell the stock when things are going great, you won’t lose the earnings you’ve gained up to that point. But that is where the betting comes in. Do I keep the stock and hope it doubles my profit? Or do I play it safe in case the stock drops 50% tomorrow?

You still need to take into account that in the stock market, you can lose every little thing. So don’t go “all in”; keep your head on straight. Learn the ropes with bogus cash, so you can be calm enough to comprehend what you are doing with real money (if you decide to go that route).

Fred Tyre has published similar articles about stock exchange and share market.

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