Virtual stock exchange contest

[gogy_tkd]

My university organises virtual contest, where you buy securities of companies from 5 indices and you have 25 000 EUR of virtual money at the begging of each month. I need ur advice guys, as same people are on top each month and they too high returns like 80%+ You can trade companies from DAX, DOW JONES, NASDAQ, Austrian and Slovenian stock exchange. Short term trading is not allowed so you can make a trade in particular market when it is closed, what is opposite how situation is in real life. For example NASDAQ, you can trade from 23-14 Central European time. If you have any tips, how I can be profitable on this contest, please let me know and if there is some possibility of arbitrage. What I was doing, was checking the after hours market, which companies performed well, and I bought that company, as this contest doesn't count in after hours prices.

 

[Andy Nguyen]

This reminds of a trading platform we had on QuantNet a few years ago and we may rewrite it in the future.
In essence, with virtual trading contests like this, the rules are put in place to prevent people to game the system. All of the price you get are delayed quotes, not real time. The holding period rule is to prevent people to buy/sell the after-market big movers stocks before the next day opening because the prices are not updated.

Try to look at the portfolio of the top performing participants and see if you can see something.
A good question is if you are asked to invest in the long term, what would you do to maximize return for your investors' capital? Keep in mind, in real world, there is cost for every transaction which may wipe out your gain.

 

[gogy_tkd]

Well in this contest there is also transaction cost on each trade, and also if u invest in US markets, also they calculate in exchange rate change. I can't see their portfolio, but I am just suspicious, unless we have in my country high school talented kids, who are making 100% monthly return on stocks like nothing. What I was doing, I was trying some stock screeners, and than look for some short term patterns, high beta and volatility stuff like that, but in like calculated investing you are maybe able to beat market for 10-20% a month. Also very helpful is on ToS (think or swim) platform, Put to call ratio, as it's good indicator, for short term trading :S If you have some advice, it would be very helpful to me, how to maximize returns on short term trading with such rules as in game :D
Last month returns
1. 156%
2. 150%
3. 130 %

And same guys always make returns like this and is very unreal for real life :D

 

[Andy Nguyen]

Would you pay to view their portfolio and trades history? Do they show it at the end of the contest?

 

[diegosanaz]

They maybe are not talented. You could be "fooled by randomess" (Nassim Taleb). There are maybe a buch of kids taking high risks and this guys are the ones who have gotten lucky. Because this is a contest, i guess that the right aproach to maximize the probability of winning is to do high risk strategies. By the way, saw your profile pic. what martial art do you practice?

 

[Andy Nguyen]

The problem with best return type of contests is that they will reward people who take the most risk. There is no downside for you to use all the paper money to buy highly volatile stocks. If you are lucky, you may make 100%+ return.
Maybe using sharpie ratio would be a better indicator for this type of trading contest?

 

[diegosanaz]

Exactly. That is why I have never liked those kind of contests. I would say the best way is to to a sharpe ratio but with minimum volatility or restricting for only risky assets.

 

[gogy_tkd]

Well happened to me in 2011 on trading contest, organised by my uni, when we got metatrader platform with virtual money and all markets allowed, and in the end I lost by 1% (had 80% return in 28 days). I had far highest sharpe ratio of my portfolio, but when there were so many crazy guys, taking enormous risk, of course out of 100 people somebody will be lucky enough. I practice taekwondo WTF style lol :D

 

[Andy Nguyen]

If I were to design a trading contest like that, I would probably put in a limit of how much capital each participant can allocate to a single stock and they have to fully invest. This way, they can't just put all their money into penny stocks whose movements of few cents would cause significant jump in whole portfolio return.

 

[diegosanaz]

Exactly, here is a crazy idea: quantNet trading contest.

 

[Andy Nguyen]

Exactly, here is a crazy idea: quantNet trading contest.

Not that crazy, actually. We used to have a trading platform here years ago and ran into the issues mentioned above when people front run before the market opens. Here is one example of how some people making huge gain buying GOOG call options.

I'm beta-testing a more advanced trading platform right now and I think a well-thought-out rule could make this a very interesting addition to QuantNet where we can hold periodic trading contest with real prizes.