The market's spiraling downward. No bottom's in sight. Worse, none of your old trading strategies seem to work anymore. So how do you test-drive new strategies without paying dearly while you learn?

Try out some of the many trading contests available free on the Web.

The Game, run by portal site

CNET, is typical of the online trading contests you'll find. When you register, you receive $100,000 in play money. Use it to trade any stock you like, provided its share price is north of $5. Your trades are recorded via an online portfolio. New games start the first of each month. The player with the best-performing portfolio each month receives a PalmPilot.

Part of the fun of playing an investment game is comparing your results with those of other players. Leading scores are posted prominently -- just as in video arcades. During CNET's September Game, the top 50 entrants had all chalked up double-digit returns. The winner was up more than 80%. Not bad, given the market's dismal performance last month. And those results look even better considering CNET's game only allows you to go long. During August, when the markets were decidedly more upbeat, the Game's top 21 performers were all up more than 100%.

Goes to show: If you take the fear out of playing the markets -- or more precisely the potential for loss -- we might all become trading gods. Indeed, the prizes awarded by trading games encourage people to risk it all. Top monthly finishers in the

E*Trade Game win $1,000. The online brokerage has also given away a $31,000 Lexus.

Marketocracy.com, a stock market contest I wrote about in a

recent column, may offer the best reward of all -- a job as a real-life fund manager.

Testing Strategies

In fact, the less tangible rewards of these games might prove a lot more valuable than any of the prizes. The contests are a great way for beginners to get a taste of online trading, for example. You can build up positions, pare them back (or double down) as the market falls and take profits as you see fit. In the course of playing, you can test trading strategies and formulate rules you vow to follow.

In the process, you'll learn about the kind of trader you are. Do you like using stops to safeguard your trades? How long do you like to hold positions, given current market conditions? And what's your work schedule? A few days? Weeks? Or three to four hours? What indicators work best? Daytraders can spend thousands of dollars on seminars (and often suffer many thousands more in losses) in order to learn lessons like these.

Of course, games can't totally duplicate real-life trading. For example, if your trading style depends on gains of a fraction of a point, these contests may exaggerate your results. How? The game's computer might award you an execution at a tight, inside-the-spread price, whereas your real-life order would go unfilled.

CNET's contest makes a valiant effort to be as realistic as possible. Its game automatically factors in a 1/16-point

bid/

ask spread on a buy or a sell to simulate market movement. The contest also adds in commission costs. And it queues up orders for simulated execution based on when they're received. And that, of course, more closely duplicates what actually occurs when you send off a real-life order.

New Trading Arenas

If you see yourself as a long-term investor, aside from being fun, the games probably won't be all that helpful. You could just as easily set up a dummy portfolio at a site like

Quicken.com, make occasional buys and sells and then monitor your results. But investment games can really help if you're thinking of trying out new tactics like margin trading or short selling.

The Investment Challenge, run by

America-iNvest.com, allows you to short stocks and trade on margin. Another feature allows you to create your own game and compete against co-workers.

Games can also give you a taste of totally new trading arenas, such as options, futures or currencies.

Ameritrade operates an options trading game called

Darwin. Likewise, the

Chicago Mercantile Exchange lets you practice

futures trading. No prizes here. And CME's tool would be better described as a simulation, not a game. Also, unlike the trading contests mentioned above, the CME's simulation levies a $35 monthly fee. But for your money you get mentoring from a CME member trading firm.

Finally, the

MG Financial Group, a currency trading firm, offers a free simulation that lets you practice trading dollars, yen and euros with a dummy $10,000 account.

What's the biggest advantage of these games or simulations? Die-hard traders often say it's tough to just sit back and watch, even when they can't figure out what's going on in the markets. Instead of waiting for the market to come to them, they force trades and lose money. During such tumultuous times, games can provide a substitute trading fix.

Mark Ingebretsen is editor-at-large with

Online Investor magazine. He has written for a wide variety of business and financial publications. Currently he holds no positions in the stocks of companies mentioned in this column. While Ingebretsen cannot provide investment advice or recommendations, he welcomes your feedback at

mingebretsen@thestreet.com.