A stock market simulator is

computer software Software is a set of computer programs and associated documentation and data. This is in contrast to hardware, from which the system is built and which actually performs the work. At the lowest programming level, executable code consists ...

that reproduces behavior and features of a

stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...

, so that a user may practice trading stocks without financial risk. Paper trading, sometimes also called "virtual stock trading", is a simulated trading process in which would-be investors can practice

investing Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

without committing money. This is accomplished by the manipulation of simulated money and investment positions that behave in a manner similar to the real markets. Investors also use paper trading to test new and different investment strategies. Stock market games are often used for educational purposes. For example, investors can create several different positions simultaneously to compare the performance and payoff characteristics between multiple strategies. A textbook may state that writing a

covered call A covered option is a financial transaction in which the holder of securities sells (or "writes") a type of financial options contract known as a "call" or a " put" against stock that they own or are shorting. The seller of a covered option recei ...

is synthetically the same as writing a

naked put A naked option or uncovered option is an options contract where the option writer (i.e., the seller) does not hold the underlying security position to cover the contract in case of assignment (like in a covered option). Nor does the seller hold ...

, but in practice there are subtle differences. With a paper trading account, an investor can set up a bull credit spread and a bull debit spread simultaneously and watch how the payoff for each position changes as the market moves. Other advanced strategies include

leverage Leverage or leveraged may refer to: *Leverage (mechanics), mechanical advantage achieved by using a lever * ''Leverage'' (album), a 2012 album by Lyriel *Leverage (dance), a type of dance connection *Leverage (finance), using given resources to ...

short-selling In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional "long" position, where the investor will profit if the value of the ...

forex The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...

and

derivatives The derivative of a function is the rate of change of the function's output relative to its input value. Derivative may also refer to: In mathematics and economics * Brzozowski derivative in the theory of formal languages * Formal derivative, an ...

trading. Successful execution and profit generation from these strategies usually require high levels of technical knowledge. Investors can test these strategies with paper trading to avoid taking on excessive risk due to inexperience. Various companies and online trading simulation tools offer paper trading services, some free, others with charges, that allow investors to try out various strategies (some stock brokerage firms allow 14-day 'demo accounts'), or paper trading can be carried out simply by noting down fees and recording the value of investments over time. The imaginary money of paper trading is sometimes also called "paper money," "virtual money," and "

Monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...

money."

Types

Stock market simulators can be broken down into two major categories - financial market simulators, and fantasy simulators.

Financial simulators

Financial market simulators allow users to generate a portfolio based on real stock entries and help them train with

virtual currency Virtual currency, or virtual money, is a digital currency that is largely unregulated and issued and usually controlled by its developers and used and accepted electronically among the members of a specific virtual community. In 2014, the Europe ...

. Most of the currently active financial simulators use a delayed data feed of between 15 and 20 minutes to ensure that users cannot use their data to trade actively on a competing system. Some simulators can produce random data to mimic price activity. The purpose behind such a system is to let a person practice with fantasy funds in a real-world context so they can determine whether or not they would gain money investing by themselves.

Fantasy simulators

Fantasy simulators trade shares or derivatives of real world items or objects that normally would not be listed on a commodities list or market exchange, such as movies, books or television shows. Some simulators focus on sports and have been linked to active betting and wager based systems.

Technology and implementation

Most of the online stock simulators run on either C, C#,

Java Java (; id, Jawa, ; jv, ꦗꦮ; su, ) is one of the Greater Sunda Islands in Indonesia. It is bordered by the Indian Ocean to the south and the Java Sea to the north. With a population of 151.6 million people, Java is the world's List ...

JavaScript JavaScript (), often abbreviated as JS, is a programming language that is one of the core technologies of the World Wide Web, alongside HTML and CSS. As of 2022, 98% of Website, websites use JavaScript on the Client (computing), client side ...

, ASP or

PHP PHP is a general-purpose scripting language geared toward web development. It was originally created by Danish-Canadian programmer Rasmus Lerdorf in 1993 and released in 1995. The PHP reference implementation is now produced by The PHP Group ...

with a

MySQL MySQL () is an open-source relational database management system (RDBMS). Its name is a combination of "My", the name of co-founder Michael Widenius's daughter My, and "SQL", the acronym for Structured Query Language. A relational database o ...

PostgreSQL PostgreSQL (, ), also known as Postgres, is a free and open-source relational database management system (RDBMS) emphasizing extensibility and SQL compliance. It was originally named POSTGRES, referring to its origins as a successor to the In ...

database In computing, a database is an organized collection of data stored and accessed electronically. Small databases can be stored on a file system, while large databases are hosted on computer clusters or cloud storage. The design of databases sp ...

. Some of them are

open source Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized sof ...

, and others are proprietary with the code being sold as valuable prediction market software. Such is the example with the HSX Virtual Specialist. This technology has been sold to major film studios such as

MGM Metro-Goldwyn-Mayer Studios Inc., also known as Metro-Goldwyn-Mayer Pictures and abbreviated as MGM, is an American film, television production, distribution and media company owned by Amazon through MGM Holdings, founded on April 17, 1924 a ...

and

Lion's Gate Films Lions Gate Entertainment Corporation, doing business as Lionsgate, is a Canadian-American entertainment company. It was formed by Frank Giustra on July 10, 1997, domiciled in Vancouver, British Columbia, Canada and is currently headquartered in ...

, as well as to the Popular Science team for use in their PPX system.The Science behind PPX
/ref> Stock Market simulator engines can also be customized for other functions than just basic stock information tracking. The HSX engine has been modified to track popular science trends and also to track

YouTube YouTube is a global online video platform, online video sharing and social media, social media platform headquartered in San Bruno, California. It was launched on February 14, 2005, by Steve Chen, Chad Hurley, and Jawed Karim. It is owned by ...

videos. Other applications that can be implemented with this software include popularity tracking and ranking from a set scale rather than an actual numerical value.

Stock market games

Stock market games are

speculative Speculative may refer to: In arts and entertainment *Speculative art (disambiguation) *Speculative fiction, which includes elements created out of human imagination, such as the science fiction and fantasy genres **Speculative Fiction Group, a Per ...

games that allows players to trade stocks, futures, or currency in a virtual or simulated market environment. Stock market games exist in several forms but the basic underlying concept is that these games allow players to gain experience or just entertainment by trading stocks in a virtual world where there is no real risk. Some stock market games do not involve real money in any way. Players compete with each other to see who can predict the direction the

stock markets A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...

will go next. Many stock market games are based on real life stocks from the

Nasdaq The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...

NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District, Manhattan, Financial District of Lower Manhattan in New York City. It is by far the List of stock exchanges, world's largest s ...

, AMEX or other major market indexes. Stock market games are often used for educational purposes to teach potential stock traders and future stock brokers how to trade stocks. Stock market games can also be used for entertainment purposes and to engage in fantasy trading competitions. Some stock market games are not based on financial markets at all. These virtual stock markets are often based on things like sports or entertainment 'stocks'. Players are asked to invest in a particular sports team for example. If the team is doing well, the stock goes up and if the team is playing badly the stock value for that team falls. Stock market games are often built into many other

prediction games A prediction game is a game which allow users to guess at the outcome of future events. Prediction games are generally operated online and are free for users to play. Points are awarded to players who most accurately predict the outcome of an event, ...

References

{{Dow Jones

Simulator A simulation is the imitation of the operation of a real-world process or system over time. Simulations require the use of models; the model represents the key characteristics or behaviors of the selected system or process, whereas the s ...