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Why Try a Stock Market Simulator App?

When you first start getting into investing and trading, you want to get experience and learn strategies that set you up for continued success. However, trial and error can have disastrous results for your finances if you experiment with real money. That’s where stock market simulators come in. These apps and websites help you gain real-world experience, all without risking your real-world savings.

Key Takeaways:

  • Stock market simulators give beginner investors a way to try out investment strategies without the risk of losing real money.
  • These virtual games let you practice investment strategies, experiment with new kinds of investments, and experience what trading is like.
  • You’ll find an abundance of stock market simulator websites as well as iOS and Android apps, so you can find a great simulator that gets you the experience you need to start investing.

What Is a Stock Market Simulator App?

Image via Unsplash by austindistel

So, you want to start investing … but you’re not sure you have funds you can risk (or want to risk) right away. A stock market simulator app is a great way to test the waters without putting your savings on the line. Stock market simulators let you play around with the market before you actually make investments.

Many simulators work by giving you a set amount of ‘play’ money along with a time horizon. Investors who come out with the highest returns are deemed the winners. But since the funds you’re using aren’t real, there’s no risk involved with these simulators. You can easily try out your penchant for investing with a stock market simulator app before you dive into the real-world stock market (and the real-world profits and losses that go along with it).

Why Use a Stock Market Simulator App?

Plenty of reasons exist for trying out stock market simulators. People use these apps to:

Learn How the Stock Market Works

Often, the best way to learn something is by doing it. That’s certainly true of investing. You can study theory all you want, but you really need to experience the market’s ups and downs yourself to understand how chance, headlines, and trends can influence stocks. While trial and error is a great way to learn some things, it’s less ideal when your money is on the line. A stock market simulator app will let you gain that real experience of trading without the big risks.

Expand your education

The education you gain from many of these apps will go beyond that real experience, too. Many platforms feature libraries that include features like:

  • Articles.
  • Demos.
  • Tutorials.
  • Interaction platforms.

Experiment to Your Heart’s Content

Even if you’re not new to trading, you can use these apps to experiment with new investment types and strategies you haven’t tried before. Want to try shorting stocks? Or maybe sophisticated investments such as commodities, futures, or forex have started calling your name. Try these out with a stock market simulator app first.

Start a Friendly Competition

Stock market simulators are great ways to compete with family, friends, and colleagues. You can all sign up and then set some ground rules, such as a time frame and how much money you’ll all start with. Then, compete to see who the best investor is. Simulators let you choose to take big risks or play it safe while everyone competes on equal footing. No one comes in with an advantage because they earn a bigger income.

Trade in a Safe Space

Think of it this way. A student driver wouldn’t start driving their first time on a busy highway. They’re going to test their skills for the first time in an empty parking lot. Likewise, you can use a stock market simulator app as a safe space to play around with the mechanics of building your portfolio and making trades. Rookie mistakes happen to even the best traders, so use that app as the place to mistype a ticker symbol or get your order type wrong. You can do so without suffering financial damage.

Test Stock Picks Without Any Risk

Many people use stock market simulator apps to test stocks they’ve been keeping an eye on. You can put in virtual funds to test how your investment of choice would have performed, getting a better understanding of the market and picking up trading strategies as you go. Test your long-term skills or set short-term goals for investing, like doubling your funds as quickly as you can. You can try new strategies and test yourself without worrying that you’ll lose your hard-earned money with an ill-advised move.

Learn To Keep Your Emotions Out of It

Investing and emotions don’t pair well together. You need to learn how to keep control of your emotions, and a stock market simulator app is a great way to train yourself to do just that. Although your decisions will come with less stress since you aren’t putting real cash on the line, your brain won’t necessarily act that way. The emotions you feel while you’re investing using a simulator can help give you a preview of how you’ll react when you’re on the trading rollercoaster — and help you get used to controlling those emotions when you need to.

Stock Market Simulators to Try

Ready to try your hand with a stock market simulator? Here are some great simulators to try:

Best Brokers Stock Simulator

This powerful app makes it easy to immerse yourself in the world of stock trading using an iOS or Android device. You get $25,000 when you start, and you get to use those virtual funds to buy or sell more than 50,000 stocks in real time. The simulated portfolio includes weekly and monthly charts to give you a better grasp on your performance overall. In addition to regular stocks, you’ll also have ways to experiment with:

  • Bonds.
  • Digital currency.
  • Exchange-traded funds.
  • Options.

HowTheMarketWorks

While this simulator is designed for educators, you can still use it to simulate investments. You’ll get $100,000 to start as well as tons of tutorials, videos, and other materials for the classroom.

Investing Game – Forex 4 Beginners

Another app for both iOS and Android users, Investing Game offers a straightforward, well-designed app for newcomers to try out forex and stock trades. You’ll get simple yet thorough explanations as you go. Real-time market data simulates a virtual market where you can buy and sell.

Investopedia Stock Simulator

This simulator gives you virtual cash to the tune of $100,000 right when you sign up. Invest those funds however you want, and compete with hundreds of thousands of users. You can also set up a private competition, setting challenges for just people you invite.

Stock Trainer: Virtual Trading

This Android app lets you get a feel for trading stock, supporting 20 different world stock markets in the United States, Germany, United Kingdom, Singapore, and more. You get access to real-time stock data, so every bit of data you see is real. You get $20,000 when you install the app to use for buying and selling any stock from any country or market in the app.

MarketWatch Virtual Stock Exchange

This simulator allows you to create games to compete with people you choose. The simulator boasts customization features such as advanced trading options like limit or stop-loss orders. It’s also possible to buy partial shares and simulate margin trading in this simulator.

Wall Street Survivor

The simulator focuses on education and competition. After signing up, you can take a few courses, teaching you basics like how to read a stock quote or how to figure out the best stock to invest in. You can join or even create a league when you’re ready to start trying your luck with virtual cash.

Forex & Stock Market Investing

Real-time stock data creates a trading simulation in this app. One unique feature of this app is its ability to simulate world events. It also shows you how to detect market fluctuations so that you can manage your portfolio better. You won’t get your virtual money right away; you need to learn some stock market basics and answer some questions. The more you learn, the more virtual money you get. A popular (and free!) iOS and Android app, Forex & Stock Market Investing lets you play around with:

  • Stocks.
  • Forex.
  • Gold.
  • Oil.

S tock market simulators offer a great way to learn the intricacies of the market before you put your own money out there. These websites and apps help you learn tricks and strategies that set you up for investing success.

Author:Kyle Dennis

Straight outta college Kyle Dennis taught himself to trade, and then made over $7 million in trading profits by the time he was 28 years old. Kyle reveals how to find, track, and profit from lucrative trades for exceptional profits. Thousands of traders follow him every day to learn how to target these high probability trades.

I specialize in trading stocks with catalysts.

A catalyst can be new information like an earnings event, industry conference, an analyst note, an update from the company, legal action, a short-seller report or an activist investor—basically any news that has the potential to cause increased volatility and volume into a stock.

For example, earlier this week Stitch Fix (SFIX) shares blasted higher after it released its earnings report.

 

 

SFIX saw its shares gap up after a positive earnings release this week.

Now, if you’ve been around the block for a while then you might already be familiar with earnings catalysts.

That’s why today I want to take this moment and do a deep dive on other types of catalysts, and how they impact stocks.

I’ll be covering what some of the most common bullish and bearish catalysts along with examples. Even if you trade “the news” it is still important to know what is happening that way you can understand how position size correctly and manage risk.

 

Bullish & Bearish Catalysts

Conferences:

Firms will often go to industry conferences to showcase their latest technology, products and services. It is a great opportunity for them to speak with analysts and customers.

For example, just the other day, we saw a nice pop in Esports Entertainment (GMBL)

 

 

The catalyst?

The company was presenting at the Benzinga Global Small Cap Conference

 

As new information hits the newswires traders are reacting to it. In this case, it appears they liked what they heard and it drove the stock higher.

 

Activist Investor

Sometimes people like to follow investors with strong track records. For example, traders often react to investments made by Bill Ackman, Warren Buffett, Carl Ichan etc.

 

Source: CNN Business

 

This can also work the other way.

For example, activist investors sometimes take short positions too, in this case, it can have a negative effect on the stock.

 

Analyst Reports

Just like certain investors have clout so too can analysts.

Of course, not all analyst actions are the same. For example, if a particular analyst has been bearish the stock they are covering, and all of a sudden they become bullish, this can potentially be very positive for the stock.

On the flip side, a downgrade could be bearish and put pressure on the stock.

 

Analyst upgrade/downgrades are tricky…they don’t always move stocks so it is important you get familiar with who the analysts are and what type of clout they have.

 

Legal Actions

One of the hot topics right now is the potential legalization of marijuanna. Any type of legal news upcoming or new has the potential to move stocks in the sector in either way.

 

Short-Seller Reports

Let’s face it, most Wall Street analysts are long biased. Very rarely will you see them issue out negative reports. However, that’s where independent research firms like Citron and Muddy Waters come into play.

And unlike private banks, they issue their research for free. And like activist investors, the top short-sellers have clout too.

Company Updates

Earlier this week, shares of Greenwich LifeSciences (GLSI) took off after the company released positive data pertaining to its breast cancer treatment.

 

Of course, it can also work the other way too…especially in the biotech space…where companies can literally thrive or die from its data results.

 

How Do You Prepare For Catalysts

A lot of times you can find upcoming catalyst information directly on the company website.

For example, here are the events that are upcoming in Netflix (NFLX):

 

 

Of course, the biggest catalysts are ones you can’t prepare for. They are breaking news stories that hit the wire. These tend to have the greatest volatility and offer the most opportunity.

But volatility is a double edge-sword. Fast moves can work in your favor but they can also work against.

The key is to be aware of what is happening and have a plan.

 

Author:Kyle Dennis

Straight outta college Kyle Dennis taught himself to trade, and then made over $7 million in trading profits by the time he was 28 years old. Kyle reveals how to find, track, and profit from lucrative trades for exceptional profits. Thousands of traders follow him every day to learn how to target these high probability trades.

Understanding the 2-for-1 Stock Split

A t any given time, any publicly traded company has a finite number of shares outstanding. A stock split is a tool that companies can use to increase their number of outstanding shares, and a 2-for-1 stock split is one of the most common types. While it’s easy to think that more is always better, the reasoning behind stock splits gets a little more complex.

Key Takeaways:

  • A stock split is a corporate action that increases the number of a company’s outstanding shares by dividing up each single share into multiple shares.
  • A 2-for-1 stock split doubles the number of shares any one shareholder owns while dividing the stock price in half.
  • While there is some practical rationale behind stock splits, such as increasing liquidity, investors should be wary of investing based only on a stock split action. The split doesn’t change any underlying business fundamentals.

What Is a 2-for-1 Stock Split?

Image via Unsplash by austindistel

A stock split is a corporate action that the board of directors at a company can take. All companies that are publicly traded have a set number of outstanding shares. The stock split action increases the number of outstanding shares by dividing each share into multiple shares, which decreases the stock’s price.

Companies can split stocks in a few different ways, including 3-for-1, 3-for-2, and 5-for-1 stock splits, but a 2-for-1 stock split is one of the most common types. When a company chooses to take this particular action, the number of shares doubles and the stock share price gets cut in half.

When stock prices increase, it has both positive and negative effects on the company. A price increase can indicate a vote of confidence, but new investors may have a harder time purchasing blocks of shares if prices go too high. As a result, companies may decide to issue 2-for-1 stock splits to make shares more affordable.

A stock split doesn’t affect a company’s market capitalization. That figure will stay the same. Think of it this way: If you exchange a $100 bill for two $50 bills, you still end up with $100 total. So, when a company does a 2-for-1 stock split, each stockholder ends up getting an additional share for every share that they hold — but each share’s value is cut in half. In other words, a pair of shares is equal to the original value of one pre-split share.

A Real-World Example of a 2-for-1 Stock Split

In April 2015, Starbucks (NASDAQ: SBUX) did a 2-for-1 stock split. It was the ubiquitous coffee brand’s sixth stock split as a publicly traded company. The rationale was to increase liquidity and offer a more attractive share price. The move cut the share price for Starbucks from around $95 to about $48.

How Does a 2-for-1 Stock Split Work?

In general, a company’s management team and board of directors want to maximize value for their shareholders. If they think that the price of one stock share is getting too expensive, they may choose to do a 2-for-1 stock split so that smaller investors can continue to invest in their stocks. If the price of a share is so high that it prevents smaller investors from purchasing stock, it will limit the number of investors, which may restrict the stock’s upside price potential.

Let’s say you have stock that is currently sold at $150 per share, and the company issues a 2:1 stock split. You (and every other shareholder) would now own two shares for every one share you had owned previously, but for $75 per share. If you previously had 10 shares for $1,500 in total value, you’ll now have 20 shares for that same value. You keep the same total value you had before, but now the shares may be more accessible for a bigger number of potential investors.

When a company does any kind of stock split, they will announce their intention to do the split and indicate that the change applies to shareholders as of a given date. Shortly after that set date, shareholders receive their additional shares.

What Is a Reverse Stock Split?

Companies can also do what’s known as a reverse stock split, which basically works in the opposite way as a traditional stock split. With reverse stock splits, companies reduce the number of outstanding shares, causing the price to rise. In a 1:2 reverse stock split, if you have 10 shares at $150 per share, you’ll end up owning 5 shares worth $300 per share.

Companies may choose to do reverse splits to gain respectability by having a higher share price, or they may do it to prevent their stock from getting delisted because the share price is too low.

Why Would a Company Do a 2-for-1 Stock Split?

A stock split has a few main advantages for the company making that move. Companies may choose to do a stock split for one of the following reasons:

  • Increasing the liquidity of a stock: Companies may feel that reducing their stock price will increase the stock’s liquidity because the split makes the stock more affordable to smaller investors. The theory behind the move is that investors will become more likely to buy the lower-priced shares after the stock split, thereby increasing the trading volume of the stock and its overall liquidity.
  • Increasing the stock price: Sometimes, a stock split leads to the stock price increasing after the initial decline in price. This happens when shares become more affordable to investors. When investors buy more of the stock, it may drive the price up again.
  • Boosting investor perception: Investors may take a stock split as a positive sign that share prices have increased. Investors may perceive that the split offers value by making the stock price more accessible. This may also motivate investors to buy more shares after the split, which may again boost share price and the stock’s overall value.

Stock splits often offer another perk for investors: They make it easier to re-balance portfolios. Because each trade now requires a small percentage of an investor’s portfolio, it becomes easier to sell shares to buy new ones.

Drawbacks of Stock Splits

Stock splits also come with some disadvantages. Beginner investors need to be careful because a stock split isn’t always a good thing. When a company does well, a stock split is almost inevitable with growing book value and dividends. However, this can lead to the false perception that stock splits mean automatic benefits.

Volatility Can Increase…

Stock splits have the potential to increase volatility in the market due to the changing share price. When more investors decide to purchase stock that’s now more affordable, the stock’s volatility can rise, which can make it a riskier investment.

…While Share Price Doesn’t Always Increase

Sometimes, companies have to do a stock split because they’re in danger of having their stock delisted. Reverse stock splits may often lead to the per-share price going up right after the split, but it may take some time for the company to recover. It’s possible that the stock may not grow in worth at all following the split. New investors run the risk of losing money if they don’t know the differences between stock split types and the reasoning behind them.

Stock Split Psychology

T hough stock splits may have some tangible potential effects (like increasing liquidity), companies often choose to make this move due to the psychology behind it. Companies may worry that as their stock price rises, investors may think the price is too high, and smaller investors may feel that it’s completely unaffordable.

A stock split pushes down the stock price to a level that many investors deem more attractive. The stock’s actual value doesn’t change at all, but the lower price can entice new investors while making existing shareholders feel like they have more shares than before.

For the most part, stock splits don’t really align with financial theory, but companies still take this action constantly. Stock splits are a good example of how investor behavior and corporate action don’t always fit in with financial theory.

This also offers a good reminder that a stock split shouldn’t be the only reason you choose to buy stock in a company. A stock split has no impact on a company’s worth because it is measured by its market cap. While there are psychological and practical reasons why companies choose to split their stock, the action doesn’t change their business fundamentals. In fact, it doesn’t change anything at the company level. Whether you have 10 shares priced at $150 per share or 20 shares priced at $75 per share, you still have $1,500 in stock.

There’s mixed evidence when it comes to stock splits. Sometimes, a stock split can help create a short-term rally in share prices, and some people believe that those results are at least partly due to the increased liquidity.

All in all, if you think of earnings like a cake or pie, stock splits only increase the number of slices you get. They don’t make that cake or pie any bigger. Splits can lead to temporary gains for investors, but they’re typically best viewed as one-off events that won’t automatically improve (or diminish) a company’s underlying quality.

Since the 2-for-1 stock split is one of the most common types of stock splits, you’ll likely come across this action when you’re investing. Understanding what this move means for a company can help you plan out your next investment move.

Author:Kyle Dennis

Straight outta college Kyle Dennis taught himself to trade, and then made over $7 million in trading profits by the time he was 28 years old. Kyle reveals how to find, track, and profit from lucrative trades for exceptional profits. Thousands of traders follow him every day to learn how to target these high probability trades.