There are two ways to make mock trades of stocks: using a paper spreadsheet or using an online stock trading game. An online game locks you into actual market prices at the time you enter your buy or sell orders, and some games allow you to set limit orders to buy or sell at specific prices. This real-time-trading feel is important because you are forced to live with your decisions. By using only a spreadsheet and prices you get from quotes, it is too easy to cheat -- or if you are of strong character and never cheat, it is too easy to justify price adjustments because you had to walk the dog or answer the phone.
Open an account with an online broker that provides a securities trading game or paper trading facility. If you don't want to open a brokerage account yet, search online for stock trading games.
Start your trading experience exactly as you would if you were using real money. Use online stock filters, analyst reports, stock price charts and the SEC's EDGAR database of company financial reports to choose which stocks to buy.
Formulate a trading plan that includes an estimation of potential price appreciation for each of your stocks. Set your goals for your buy-in price and your sell-out price. Take notes explaining why you chose your buy-in and sell-out levels so you can learn from your mistakes.
Create a diversified portfolio of five to 10 stocks. Build your positions as an experienced trader would -- by holding off buying until the price is right. Learn to conserve your trading capital.
Place your buy orders and monitor the market just as you would if you were using your hard-earned money. Consider also placing sell orders at specific prices if your online game allows them. You can always change them later.
- Continue paper trading for as long as you can. Each trade will teach you something about the marketplace and what to realistically expect. Spending extra time developing good habits will also help combat the natural panic response you will encounter when you are trading with your own money.
- Don't get too confident if you seem to be booking a lot of profits. Mock trading does not duplicate the emotional highs and lows you go through when your own money is at stake. In real-world trading, many excellent paper-traders lose their money when they buy or sell stock when in panic.
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