If you are a novice in investing in the stock-markets, the best way to hone your skills would be to undertake some stock-paper trading. This is essentially a simulation game; if one may call it a game, where investors buy and sell paper stocks fictitiously.

You as an investor can undertake paper stock trading without committing any real money.

How Do You Do This?

There are various sites available on the internet which allows investors to undertake such trading. You can choose your stocks and build a portfolio on such a website without committing any real money.

Prices of stocks on such investment sites mirror the actual prices of stocks on markets where they are listed. Thus your portfolio valuation will move up or down depending on how the stocks you have 'bought' have performed in real life on that day.

Benefits Of Stock Paper Trading

This is good practice arena, and any potential investor should first spend some time doing such trading before venturing into the stock-market. It will give you an idea of how good your stock selection strategy is. It will show you how the sectors in which you have invested have performed, which in turn will make you realize whether you have invested in the right sectors.

While stock-prices vary according to the performance of each specific company, sectoral performances are based on broader macroeconomic indicators which affect that specific sector. You should therefore be in the right sector at the right time. Choosing a stock whose performance has historically been outstanding, but the outlook of the sector to which it belongs is bleak, owing to factors such as over capacity and new government regulations, may not work well for you.

All investors when they embark on the stock-investment path, do make mistakes. Many lose a lifetime of savings. It is therefore better that you practice your hand in stock paper trading before you take the plunge.
It is not that months spent on such practice will guarantee you good returns on the stock-markets. Returns will depend on the stocks you have bought and the overall condition of the sector and the economy.

What stock-paper trading trains you in is the manner of selecting potentially good return stocks and how to avoid pitfalls in the markets.

Options Available

Many companies provide this type of trading opportunities; some are free while others charge a fee for the service. Apart from the basics of trading in the markets, you can practice higher level investment options such as simultaneously setting up different positions to compare the payoffs in each, short selling, futures trading and leveraging.

It is a good idea to do some stock-paper trading before you put in real money into real stocks on the real stock-markets.