Your Questions About Paper Trading Stocks

Mary asks…

how do i loose the money in shares?

i have been doing paper trading and it seems perfect .. on the paper i have earned good amount. but i don’t understand how am i going to loose money? is it by investing lot’s and lot’s of money without thinking and doing correct calculations and saving less? and by investing blindly because of greed ?

John answers:

Wrong investments lead to losses. For example, consider Kingfisher stock. Many people invested in it believing in the Mallya brand-image. But, KF stock has plummeted like anything. So, the shareholders of KF-Airlines have lost lots of money.

Chris asks…

What should I know before investing in stock? How do I know what stock to buy?

I am 18 and want to buy stock. I opened an account at Scottrade today and will visit their nearest branch soon.

John answers:

Before you buy any stock you need to know which stock to buy, when to buy it, at what price to buy it, how many shares to buy, when to sell it, how many shares to sell, and what price to sell them at.

There are some basic books you can read about it, such as ‘Trading For Dummies’ and perhaps ‘The Intelligent Investor’.

But reading books about it won’t teach you everything. You also need some practice and experience. And this you can acquire by doing some paper trading of stocks with virtual money at free websites such as:

Laura asks…

What is the best site to practice for the stock market?

I want to learn about the stock market, and practice investing in the stock market.

I’ve seen a lot of “Stock Market Game” websites on the internet; which is the best? (Preferably free!)

John answers:

I think it’s great that you’re getting into stock investing. And certainly, it’s always great to practice before taking the plunge fully.

However, be aware that paper trading with no money and actually investing with your own real money are two different things. They may seem like they are the same, but many first-time investors get overcome by their emotions when they first start investing with their own money, even if they’ve practiced first with paper trading.

When you’re paper trading, your emotions aren’t in full force since you have nothing to lose except maybe some bragging rights if “your” stocks go down. However, if you’ve got real money on the line, you’ll find that you start valuing things differently and your emotions get in the way a lot more frequently.

You might be “afraid to lose” so you sell too quickly. Or if it’s your own money, you might see a great company at a great bargain, but you’re afraid to actually buy the stock because you don’t want to lose your money.

The best way to become a better investor is to actually get in the game. That way, you start to learn how to invest with your emotions in full force, and you learn how to check them at the door when following your investment strategy.

You can open a brokerage account with very little money, and start investing. Now, again, I would take some time to learn what your investment strategy should be (the one that fits your risk tolerance, etc.).

I’m a big advocate of value investing (finding the right companies to invest in, buying them at the right prices, and only selling when they become overvalued…). There are a lot of great resources out there to get started in value investing (I have a number of my favorites on my website…)

Hope this helps, and good luck!

Maria asks…

How can I start learning about the stock market?

My father has given me a cool opportunity to learn about the stock market and investing. He has given me $5,000 and wants me invest in something by the end of the month (its January 18th, i have until February). I have no knowledge of stock market patterns or any of the Do’s and Do Not’s, not even the basics (other than “Buy low Sell high”). I was wondering how/where i could start off my research. What are some important aspects i should learn about the stock market that will allow me to make a smart investment. I am 16 so you dont have to be condescending. You can explain it to me yourself, or you can tell me where i can get the information, i dont mind either.

John answers:

If you are in North America you can NOT invest until you’re 18 years of age.

Neither you or any one else can learn in a month what investments any one should make, nor learn the proper aspects in order to make a “smart” investment

For now, since you can not invest at your age – put the money in the bank and start learning about investments

Before you spend $0.01 on any investment, you must know what you’re doing, why you’re doing it and how to do it. Before you invest in any security, the first investment you should make is in yourself, and the best investment you can make is by educating yourself.

Begin your education by learning why you should invest and the importance of being able to make your own decisions or how the pro’s make theirs. Start your education by reading “Investing or Dummies” by Eric Tyson.
To continue your education select some of the following
Beating the Street by Peter Lynch
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered, by Gallea
From Riches to Rags, by I.C. Freeley
Millionaire Traders, Lein & Schlosberg
How to Make Money in Stocks” by William O’Neil
24 Essential Lessons for Investment Success by William O’Neil
The Intelligent Investor, by Benjamin Graham
Common Stocks, Uncommon Profits, by Philip A. Fisher
One Up on Wall Street by Peter Lynch
Stocks for the Long Run, by Jeremy Siegel
Trading for a Living, by Alexander Elder
Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblatt.
What Works on Wall Street by James O’Shaunessey
You Can Be a Stock Market Genius by Joel Greenblatt
Your Money and Your Brain by Jason Zweig

Websites that can provide instructions and help with procedures and terminology are Investopedia – and 1 Source for Stocks – or Smart Money
Visit some of the more professional websites like Zacks Research – Schaeffer’s Investors Business Daily –
Some of these web sites will have advertisers who are worth looking into also. And remember, if they offer free information, get it.

Attend all the free seminars you can, just be careful and don’t get pressured into anything you really don’t want or need. Most schools offer courses in finance and economics, but very few will have courses on the mechanics of the investment markets, if they do try taking the course. You may want to consider on-line courses, the New York Institute of Finance use to have such courses. Try to get some fee information from The stocks exchanges they all have (had) free booklets, SIAC and some of the regulators (FINRA SEC MSRB CBOE) may provide some free literature.

And when you think you want to invest/trade, try some paper trading to test your skills without spending you money

You at least have made the right decision to start investing, this is the first big step and it won’t be your last. Keep taking those steps forward and along the way never take the advice from people that are not in the market or try to tell you not to invest.

Good luck on journey, study hard and you’ll invest well.

David asks…

How many stocks you can buy and what price?

I don’t know much about stocks. I’ve bought a lot through previous jobs and they opened up a free account for me on a stock trading site. After I lost my past job, I bought some by myself on that site hoping to make a lot of money. I’m always watching certain stocks, recently penny stocks closely because I can buy more shares and hopefully make more money. I don’t understand some things about them. When I check the prices on them, there’s the current price, the bid price and ask price. This certain stock I have been watching recently has said the bid price is .0001 x 10000. My main question right now is can I buy shares of this stock for .0001? If so, you could spend $50 and buy 500,000 shares or spend $100 and buy 1,000,000 shares. The current price is .085. If you could buy 1 million shares for $100 and turn around and sell them for the current price, you would turn your $100 investment into $85,000. I know this sounds stupid but I would just like to know if it is possible. Also what does the 10000 mean when it says .0001 x 10000 for the bid? Then the ask price is .16, what exactly is this for? I don’t understand all of these different prices for one stock. Any information or help with these questions or suggestions on how to invest money with stocks would be greatly appreciated. Thank you.

John answers:

It is virtually impossible to make money on very low priced penny stocks, because those are valueless or sometimes only paper companies and will most likely be de-listed from even the pink sheets and never be heard of again. Don’t waist your money on them. A bid of 0.0001 x 10,000 means the broker (market maker) will have to sell you 10,000 shares at the quoted price of $0.0001, or about a dollar’s worth.

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