Stockfuse is no ordinary stock simulator. Designed and built by former Wall Streeters, Stockfuse incorporates our combined experience in trading and quantitative research. Our goal is to create a platform that closely mimics real-life trading dynamics, with investment returns that can be reproduced in the real market.
Unlike other simulators, we do not use last trade price (i.e., the price seen on Google/Yahoo Finance) for trade execution, since last trade prices, contrary to common belief, are historical prices and no longer accurately reflect the most up-to-date market information. Instead, execution prices on Stockfuse are determined as follows:
- We start with the real-time mid price (i.e., the average top-of-book bid and ask prices).
- From the mid price, we add an execution cost. The execution cost has two components: spread cost and market impact. The spread cost simply reflects the real-time bid/ask spread in the market. After accounting for spread cost, small buy orders will be executed at close to the asking price, while small sell orders will be executed at close to the bid price. For large orders, however, we must also account for market impact. Intuitively, to execute a large buy order, the price must be raised in order to attract sellers; furthermore, by placing a large buy order, you’re signaling to the rest of the community that you believe the fair price of a stock should be higher. These factors combined would push price higher than the asking price.