Virtual Trading

Guide to Virtual Trading, Including Pros and Cons

Diving into the securities market with all your savings is difficult, especially if you do not know anything about the market. You might feel scared and end up overthinking all the consequences and risks associated with the securities. However, sitting about the market is not smart either, as it is the best way to make money. If you’re caught up in a similar dilemma, it is best, to begin with, virtual trading.

What is Virtual Trading?

Virtual trading helps you understand and trade in the securities market using virtual money. An application, known as the stock market simulator, creates a mirror environment of the stock market and actual trading, which helps you understand how real trading works.

In virtual trading, you use virtual money to buy and sell shares, bonds, mutual funds, and other instruments. No real money is invested, so there is no risk of losing cash. The whole inspiration behind virtual trading is to let the investors practice and also educate themselves about the stock market.

How to start with Virtual Trading?

You can start with virtual trading by using virtual trading platforms. But, before you go ahead and start using a virtual trading platform, there’s something you need to know. Essentially, every virtual trading platform can be classified as either a financial simulator or a fantasy simulator. Here’s a lowdown of what that means:

  • Financial simulators

Financial simulators help you practice how good you are at trading. Here, the users have access to virtual money, which they can use to strategically invest in the shares they feel have potential. Users are provided with in-depth financial data, which helps them create a plan, and by extension a portfolio, on the basis of real feed. Although everything is done in real-time, the feed runs behind by 15-20 minutes.

  • Fantasy simulators

Fantasy simulators are more fun than financial simulators, as users are allowed to trade in the shares and derivatives of the real world. The fantasy simulators are actually the shares and derivatives that are available to trade.

Pros of Virtual Trading

Let us now go through the pros of virtual trading:

  • No capital risk

The best thing about virtual trading is that you’re not using your money. So there’s absolutely no risk for capital involved. Despite that, you can trade any of the markets and learn to analyse tons of data important for picking the right stocks.

  • Helps build confidence

When you practice regularly on a virtual platform, you learn how the market works. You can, then, analyse whether or not your strategy worked and take corrective measures to improve your trading game. This will give you confidence that you can crack it in the real trading world as well.

Cons of Virtual Trading

Here are some cons of using virtual trading:

  • No real money involved

Virtual trading doesn’t have capital risk. While it is a good thing, it doesn’t necessarily help you that much when you enter the market. Psychological stress is different when there is real money involved.

  • Doesn’t reflect market conditions

Virtual trading does not reflect the conditions of the real market, which is susceptible to a lot of factors. These factors are not considered in virtual trading, so it isn’t a reflection of the real world.

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