Which online brokers offer simulated or virtual stock trading platforms?
There is more than one way to invest in the stock market and while many investors will debate that one approach is “the right way” to go about investing, it’s my opinion that any approach is “right” if you’re making money by employing it… consistently.
That said, most people should avoid day trading, in my opinion. The casual investor should avoid this type of investing and instead stick with indexing and long term investing. But if you insist on wanting to learn how to trade stocks or options, then you should start out by testing the trading waters first by using a virtual trading platform that allows you to invest without risking your own money. Paper trading will help you determine if you’re cut out to be a day trader (or any kind of trader, for that matter).
There are quite a good number of discount brokers and investment websites that provide this simulated trading service for free. Here are a number of them:
Day Trade By Paper Trading First! Try These Investment Resources
1. Zecco
Zecco is known for its ongoing free stock trades offer. They’re the only brokerage with this feature: as a customer, you’ll receive 10 free stock trades per month if you make at least 25 trades monthly, or if you have a minimum balance of $25,000. And their regular trades are pretty cheap at $4.50 a trade. Zecco also has an active investing community with a forum feature and a simulated trading platform called the Zecco Zimulator. Zecco Zimulator is a free trading game that comes with a lot of other educational resources at the Zecco site. Some features:
- Invest in a risk free environment.
- Test your ideas without committing your own money (use “play” money).
- Compare your results based on real world results.
- See how other virtual traders perform.
- Trade for fun.
For more details, check out the Zecco site.
2. Scottrade
This broker offers $7 per trade and has several trading tools, one of which is their Scottrade ELITE Virtual Trading Demo, which aims to give you a realistic view of how their actual trading environment works (called the ScottradeELITE Advanced Trading Platform). You’ll be able to use the platform with $100,000 of virtual money to use for trading. The market data it provides is delayed by 20 minutes given that you’ll be using a demo account. For more details, check out the Scottrade site.
3. OptionsHouse
One of the cheapest brokers in the industry, OptionsHouse offers a flat $3.95 for stock trades. Right now, you’ll get 100 free trades simply by opening an account. They’ve got a virtual trading system that uses the full suite of OptionsHouse tools such as streaming charts, news and tracking tools. I noticed that their emphasis may be on teaching you how to trade with options although they do cover standard stock trading activities as well. So if you open an account, you’ll have access to the virtual account, which will start you off with $5,000 of play money. You can increase your virtual account balance incrementally over time. For more details, check out OptionsHouse here.
4. optionsXpress
Another well known stock and options broker, optionsXpress has commission rates that are between $9.95 to $14.95 per stock trade, depending on how many trades you make. But they have an ongoing promotion right now, which will give new customers $100 cash for new accounts after 3 trades have been executed. They also have the Virtual Trade platform, which will allow you to use the optionsXpress account screens, tools and resources without putting your money on the line. For more details, check out optionsXpress here.
5. TradeMonster
Pricing for TradeMonster is a flat $7.50 per stock trade. They’ve also got some solid tools here, including paperTRADE, where you can learn and practice how to trade stocks. This platform boasts drag and drop customization, real time streaming quotes, charts and balances, risk analysis, performance charts, etc. Again, no need to risk your own money here when you can learn the ropes by trading stocks, covered calls, and even complex option spreads. For more details, check out TradeMonster here.
6. WeSeed
Not very many people may know this but the people behind WeSeed are affiliated with those who run OptionsHouse (PEAK6 Investments, L.P., a highly successful options trading firm), so they’ve got some top investment talent and experience behind this site. Membership is free and its aim is to help people learn and understand how the stock market works by allowing you to invest with WeSeed cash. You can build a portfolio and get educated on investing, but there’s also a social element to this site called WeSocial, where you can connect and invest with other members.
More On Investment Education
There are other brokerages and sites with a variety of trading tools that can help you learn how to trade. I would recommend TradeKing and ETrade for this purpose as they are highly rated (garnering top awards from financial publications) for their tools and customer service.
Those eager to start investing should begin by reading about how to invest. Most investors should stick with long term investing and should develop a diversified investment portfolio that can withstand market gyrations. But those who want to try some trading should determine if they’re built for this by doing some fantasy stock trading first. See how you compare to successful traders out there and find out if you have the knack for it. I wish there had been more of these platforms available to me when I first started investing — if so, I would have probably saved myself some serious money over the last few decades.
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{ 27 comments… read them below or add one }
So many people get wiped out! It’s just gambling in the long run.
John DeFlumeri Jr
This is a great idea. A long time ago (8ish years?), I did something like this on Yahoo. My performance was pretty bad, so I gave up any day trading dreams at that point 🙂
@John,
I agree, it’s gambling. It is gambling when you do short term trades — but supposedly, it’s making bets where you try to stack the odds in your favor by employing stock and options analysis in a “skillful” manner. That’s the whole point of using “fantasy” stock exchanges, so you don’t wipe out and lose your money when you play the market, and well, so you can have fun while playing (rather than stressing out).
If you ever feel like you’re ready to risk your own money later on, well, that’s your prerogative. As mentioned, I believe that if these virtual exchanges had been around ages ago, this would have saved me a bundle by letting me know what a poor trader I was. 😉 YMMV. Could it make anyone a better trader? Perhaps. You’d have to measure how well you’re doing to determine that.
@Kosmo,
I had been investing way before the web was around, so I never had much of a chance to use such trading platforms way back when. But at least you figured out you wouldn’t be making money this way!
This is a great post on a fascinating subject. I actually did a post on my own site (“Day Trading: Investment Program or Career?” Sept 22, 2009) in which I interviewed someone who’s actually doing day trading for a living. While I struggled with even doing a serious post on a “business” that seems so speculative on the surface of it, my mind was changed after interviewing him for an hour.
Not surprisingly, he said the same things written at the beginning of the post here, that day trading isn’t for casual investors and it isn’t for everyone. In fact, he said it isn’t for investors at all, because it’s really a business worthy of a full time effort. He recommends trading on paper until you demonstrate an ability to make money, and also was emphatic that YOU WILL LOSE MONEY, so you have to have the emotional make up to handle that and move on.
Successful day traders have my respect.
When I first started this blog, I was pretty adamant that you shouldn’t get into trading at all. I would opine that active traders were going down the wrong path and that day trading was a surefire way to lose money. That’s absolutely true if you’re the “average” (casual/small/retail) investor.
But over time, I’ve realized just how big the market is for day traders (and active traders) and these are people (as Kevin says) who treat this like a real business or career. Many of them make big money this way. Hence, if you’re a casual investor excited about trading, be aware that you’re going to be in the same pool as the big sharks out there who’ll be eating your lunch. 😉
You can certainly use trading games from a variety of sources like Yahoo! Finance and other standalone sites. The advantage of using the ones offered by online stock brokers is that you are testing the very tools you will be using if you do decide to trade with your real money. You already have a brokerage account this way and you can transition to the real thing pretty easily, if you so decide.
Hmmm, I’ve used investopedia in the past to simulate trading, but I didn’t realize that Scottrade and the ones you list above had such a system.
Now that I know they that they do have such a system, I’m thinking of setting up an accounts to teach my kids about the stock market. They each already have an account, in an UTMA account at Charles Schwab, but they don’t know that.
Thanks for the helpful information!
@Don,
If your goal is to educate your kids about the stock market, I would recommend that you try WeSeed: its objective is to educate and teach people about the markets. The trading platforms available at the different brokerages are more for those who are interested in testing out the brokerages’ trading and investing tools so that they can get a feel for how the brokers’ actual systems work. This would then help an investor to transition to trading with their real money in their account. I would expect the brokerage trading tools to be relatively more sophisticated (since they are geared for both stock and options traders).
Again — for pure stock market education, try WeSeed or use the simpler portfolio tools you’ll find at Scottrade, TradeKing and ETrade (rather than their virtual trading set ups).
Let me also add that mutual fund companies are now quite sophisticated about educating their customers as well. I have my portfolio spread across brokers and mutual fund companies and they all have pretty good educational resources, content and tools available. I particularly like the info offered by stalwarts like Fidelity, Vanguard, T.Rowe Price and Schwab.
@SVB – Wasn’t it 93% of millionaires surveyed in The Millionaire Next Door were long-term investors (meaning they held their investments for one year or more)? If we’re at 3.5% of households as millionaires and only 7% of that group practices short-term trading, doesn’t that mean that the probability of becoming a millionaire via short-term trading is around 0.245%. And, this would include people actually earning a paycheck and not living off of their trading profits. If you take profits to live off of, I suspect the odds would diminish greatly.
In short, definitely agree with you that trading is a bad deal for the overwhelming majority of investors. If you actually are good (and this is for the fraction of 0.245% of the population show are short-term trading millionaires), you should parlay this into a full time gig as an investment manager (funds, private equity, whatever) like Buffett did when he went door to door with copies of his tax returns (oh, but Warren wasn’t a day trader either so maybe not the best example). Institutional investment management surely pays better and you still get to trade to your heart’s delight.
Trading!?! We talkin’ bout trading?!?! Bad idea all around…fancy trading schemes be damned.
@Michael,
Agreed. We need to make the distinction here between the majority who should stick to long term indexing and investing vs that small portion who become serious traders who make money on this as a “calling”.
My point is to share information that will allow people to convince themselves that they may or may not be cut out for the short term trading stuff. Unfortunately, I know way too many people who can’t be convinced they should STOP trading with simple arguments. So the deal is — fine then, try it out for yourself. And you don’t have to risk your money to get that kind of education.
I knew a couple of people at my former jobs where one was adamant about ONLY doing short term trades. No amount of debating, arguing and persuasion would sway him. He felt that using mutual funds and index funds was way too boring for him. I guess he’ll learn the hard way over time? And no, he was not a sophisticated investor.
But there was a brilliant guy I used to work with (we were in the financial industry) who did day trading part time (well it was really NIGHT trading since he did most of it after work). He made a good part time income from it consistently because he was truly gifted — extremely mathematically inclined and half the time, I could not follow his theorizing. Anyway, he was “built” for this sort of thing. By the way, this guy would NEVER be suitable as an investment manager. He was an IT guy through and through and excellent at his technical job.
At any rate, if anyone fancies themselves as a budding day trader, you can certainly save yourself loads of grief and dollars by learning the ropes with free tools and educational materials. No need to use or risk your real money while learning and finding out if you’re a fit.
There are people who love trading and no amount of dissuading will change their minds. So why not throw them a lifeline here? That’s where these trading sites are coming from, I suppose.
People who day trade certainly have my respect too, if they can make a go of it. I agree it is good to “practice” on virtual trading sites, but I think it is still a lot different when you have your own money in the game. You are going to take risks and gambles with play money that you should not take with real money. You have to do research and follow market trends if you are going to be a successful trader.
I follow a group of about 5 stocks regularly. I have been watching them for several years so I am fairly comfortable on how they move and their earnings, P/E ratio and all that. If they move in a certain direction, I trade them. If they do not, I am on the sideline. I am not a day trader, I would classify myself as a casual trader. I only make some spending money this way and that is about it.
At the end of the day, its about the discipline and research you put into stock trading.
I’ve never heard of WeSeed before. Sounds like it might be the perfect platform for my kids!
Thanks!
This day trading seems to be the new hype. I don’t see how you can make money consistently because of the market fluctuations but there are more and more people profiting I noticed.
I have seen my day trading “competition” and for the most part they are a complete joke preying on brand new traders and investors who still have their head in the clouds thinking 50% every month is possible. It might be for 1-2 months before their strategies cause them to lose their whole account. It never works in the long term.
I agree that ‘paper trading’ is a good idea to learn the ropes but the key thing is to treat your demo account seriously. Don’t just make trades for the sake of it because you know the money isn’t real. You’ve really got to focus and pretend that the money is real. That way you learn a lot more and prepare yourself should you decide to trade with real money.
@John,
Thanks for the advice on that. That totally makes sense. Take things seriously, stay determined and hopefully things fall into place. If it’s not working out for you, then you know it’s not your “thing” and you should cut your losses while you haven’t made any yet, right?
to practice paper trading, the brokerage firms all require a social security number to “open” a paper trading account. There are lots of great stock market games out there that are not associated with a brokerage firm that are better than weseed.org. My favorite is Wall Street Survivor.
What if I tell you I have a program that takes the risk out of day trading? That we have a 8 month flawless track record in Forex and are day trading at a 98% & higher successful rate? I could back it up and show you. I would love to show you how you can make more money…anyone can use our system…it does the work itself. It’s pretty amazing. It’s the only program that exists that we know of in the world.
When anyone tells you that you can make money using a “system”, beware — approach it with a healthy skepticism. I wouldn’t fork out money to test a system out, as a lot of the time, from my experience, systems don’t work as advertised; a lot of promises are made but no real results to show for it. Hence, I love free trials because you’ll know for sure if something is suitable for you in this case. So buyer beware!
If I could demonstrate to you that what I claim is true beyond dispute, how would you respond to that? We have just released this tool to the public and have expert day traders come into our office daily to verify what I am telling you. What if we have actually cracked the code to day trading? Imagine what we would have, in fact, what we do have I can prove this over and over and over to anyone interested. If you are interested or just want to learn more about what i have, send me an email and i would love to tell you more and answer any questions you will have 🙂
-Sara
Editor (that’s me, SVB): So sorry, I don’t print out emails for public consumption here, but some questions we have: do you have testimonials and references and is there a reasonably long trial period to test it out? Barring satisfactory answers to those questions, you’ll only be met with skeptics. Also, do you have a web site that describes this system? Barring that, I can only conclude that it’s another marketing scam…. er scheme.
Here’s the thing I have about people who claim they “cracked the code” on something. If you did, then why do you want to sell the idea to someone else? If you can tell us for free, then great, maybe you’ve got something there. If you are selling something, then I would wonder — why would you want to sell such a fool-proof idea? You are making tons of money trading, then good for you. Why sell such a great idea? What is the agenda? Yeah, you see, you sell an idea because that’s how you make money, not by executing the idea yourself.
I would have less of a problem about this if (a) you came out and showed us the idea or gave more information about it rather than surreptitiously talk about it in an anonymous way in this blog (b) offered a long enough free trial to prove your point.
Already, you promised the Holy Grail here and everyone knows there’s no such thing as a perfect product. So what’s the catch?
The Reason I’ve been going around it is because i do need a non disclosure form signed first for the protection of our product. If you want to send an email to me. I will send you a nondisclosure form then will be very happy to answer all of your questions and show you how amazing it is.
Yes, it does cost to use our program but no it doesn’t cost anything to see that it works. We did 3 pilot programs one in orange county, tusan, and salt lake city. And in just few months all have been making a large income. and these are just average joe’s like me who responded to a posting on Craigslist.
Send me an email and I would be so happy to tell you all about it.
The closest anyone is going to get to a holy grail is learning how to consistently have a positive expectancy and good money management. Paper trading is a great way to figure those out without risking real money. BUT… it doesn’t factor in your own psychology. Most people don’t realize how much their own mind works against them when it comes to trading. They become completely different people once the account goes from paper trading to live trading.
You should never base your decision using virtual money. Maybe you just got lucky and when you use real money, you can lose everything in just a matter of seconds.
Well i don’t think it is easier to make money through the stock market … If you are not good at calculations, etc. then it is better to go for mutual funds or ETFs.
I don’t think there is any harm in paper trading and should be encouraged for any trader undertaking a new strategy to test its results without the real-world pain. Long term asset allocation is the real key factor that determines over 90% of an investors long-run returns. Spend less time on stocks and daytrading and more time finding the best trending asset categories.. then buy the whole sector with an index or ETF.
Paper trading or ‘mock trading’ is an absolute must for anyone considering day, swing or position trading. Not a bad idea for long term investors to paper trade too before using a broker’s software. Best to get used to and practice with any trading platform first, so as not to ‘fat finger’ or make some kind of mistake that will cost you money.
Strategyard.com is another great site for paper trading. It allows creating multiple strategies and provides APIs for advanced users who want to set up automated trades.