- Virtual trading is a good way for individuals who are new to the world of trading to get a decent understanding of how the markets work without investing any real money.
- NZX virtualTrading, an online trading platform, helps beginners learn about the concepts and fundamentals of investing by mimicking NZX.
- Participants must develop a basic level of knowledge before beginning to trade virtually and must explore different techniques/methodologies to learn the nitty-gritty of investing.
- Participants must build multiple portfolios and focus on ‘on-the-job’ learning. They must remember that education, coupled with trading experience, prepares an investor better for the real stock exchange.
For new investors, taking a direct jump into the stock market can be very stressful. Most of the investors do not possess the skills and knowledge before jumping into the world of trading. Hence, they are depended on the trade advisors. Virtual trading platforms like New Zealand’s Exchange (NZX) virtualTrading offer individuals to learn key investing concepts in a risk-free environment without spending real money.
On this platform, one can trade at one’s own pace in a virtual, 24/7 online environment. Any interested trader can register and trade on NZX virtualTrading. The securities and pricing provided on the virtual platform are based on the ETFs and shares trading on NZX, which makes it a familiar place to trade online. This service provided by NZX to considered as a fun educational tool to learn investing and trading concepts. NZX Limited operates NZX virtualTrading.
While you dive into the world of NZX markets and trading, the education centre here provides you with the information you need. Let us understand how NZX virtualTrading works and what are five suggestions you should follow to trade on NZX virtualTrading platform successfully.
After registering on the NZX virtualTrading platform, you are required to activate the account. NZX virtualTrading then will transfer an initial NZ$50,000 of fake money to get you started in trading and practice buying and selling securities.
Source: NZX virtualTrading
- Educate yourself but don’t get carried away
Before investing your real money with unlimited risk, make yourself well prepared about the essential aspects of trading including equities, ETFs, selling and buying, and pricing concepts, among others. Learning a new language is probably easier than learning to trade, which requires efforts and dedication. NZX virtualTrading provides the right kind of education that makes you understand how the market works and prepares you to deal with everyday ups and downs. It is necessary to make yourself acquainted with technical terms. Study about your general financial capability and understand whether the share you are trading in is the right fit for you. Learn about stocks, derivatives, and debt market extensively.
However, just because you study trading doesn’t mean you can become a successful trader, just like playing footfall on PlayStation doesn’t make you a professional footballer. If you make a profit on a virtual trading platform, understand the approach that led you to it so that when you enter the actual game, you are ready.
- Research different techniques
The platform offers full-fledged education in investing, so do your homework by studying different technics. Try various articles, tutorials, demos to research as much as possible on concepts like Profit and Earnings, Dilutions and Adjustments, EPS, DPS and NTA, Share Price Data, Balance Sheet Ratio. Whether you are a newcomer or an expert in the market, there are multiple resources available on the platform to understand how security trading works.
You must remember that since it is not an actual representation of the real stock market, your trading activity might not reflect real-time market scenario.
- Build multiple virtual portfolios
To test different investment strategies, NZX virtualTrading lets you set up virtual trading portfolios investing fake money. Try to diversify to extent possible by investing in selected ETFs like Smartshare's 30+ listed ETFs. ETFs let you effectively buy units of pooled assets. With this strategy, one can beat the market or at least meet the market performance. This strategy is known as passively managing "baskets" of assets. Warren Buffett, one of the wealthiest individuals alive with a net worth ~US$72 billion (~NZ$109.4 billion), has endorsed this investment strategy. He believes that people should prefer diversifying over trading as it will help their funds perform at the market level with minimum cost.
For other portfolios, you can invest in known NZX-listed companies where you have already read their company reports and read/heard management strategies. In this scenario, you know where you are investing, and are confident that these companies will continue to perform well in the future.
- Analyse your strategies
On the virtual platform, you can assess the summary of your transactions for securities. This virtual stock trading tool is a learning platform. Hence, it is beneficial to study and analyse your trading pattern. When you enter the real market, you must know different strategies on investing.
Without knowledge or experience, you could lose your entire investment. The virtual platform provides a reset button to ensure that you can continue trading. So, trade a lot with different approaches, and analyse various permutations and combinations before you dive into the market.
- Investors psychology is different for virtual and actual investments
On the virtual platform, an investor tends to follow a set rule or strategy like holding the winners over the long-term, to achieve the best outcome. But when it comes to real markets, investors tend to do the exact opposite by holding onto ineffective stocks expecting a quick turnaround, ultimately, failing to book timely profits and suffer losses. Also, it is imperative to assess your risk appetite while you are test driving on a virtual platform. Make yourself accustomed to the volatile environment.
While some consider virtual trading as a fun activity in a risk-free environment, it is imperative to view virtual trading as an analogue to actual trading and build an approach as if one is investing in the real market. A sincere approach to virtual trading would reap benefits when you begin trading on the actual stock exchange.
ALSO READ: Your Ultimate Guide to Online Share Trading!