4 ms·

In 1996-7, I was on a junior high team to do virtual stock investing using mail in scantrons. We were terrible, and stock pickers. The stock I lobbied for: SGI.

In 1996-7, I was on a junior high team to do virtual stock investing using mail in scantrons. We were terrible, and stock pickers. The stock I lobbied for: SGI. Singly the worst investment choice on the team. In 2000'ish, I decided to join some yahoo portfolio challenge and threw the initial pool into Geocities and jumped into a high tier spot. Junior year of college, someone in the dorm went about running a portfolio challenge, and my roommate and I slowly realized the way to win was volatility, and I eventually found an earnings report calendar on Yahoo that was essentially our rosetta stone to winning, because the guy's system let people buy in after hours at market close prices. Wake up a few minutes before market open, search the earnings calendar for stocks up in after hours trading, and place your entire portfolio in one with a huge earnings surprise. I think someone else was front running the guy's system by using a feed 5-10 minutes ahead of the Yahoo API he was using, to find a series of 1 percent per five minutes trades. In retrospect, these sorts of 'whoever has the most in 3 months wins!' competitions teach novices how to gamble and cheat, rather than allocate assets prudently. These days my retirement portfolio sits in low cost index funds.

jacobolus 12y ago
In spring 1998, my 6th grade class did a virtual stock investing game (using prices from the newspaper business page, with ability to change our picks once a week or so). My big picks were Dell and Lucent Technologies, and my portfolio more than doubled in the course of 2–3 months, far outpacing the second best student, who gained like 15%. Both stocks crashed within a few years after.
Retric 12y ago
Or go pro. People make 100's of billions of dollars every year 'cheating' in the stock market... Some of it's even completely legal. Find a hedge fund that's a little slow to update their purchase price based on market changes and eat them alive. Figure out when large trades are going to happen and remove liquidity at the right time etc etc.
- iheartmemcache 12y ago
  How would ou 'figure out when large trades are going to happen' without violating 10b5?
  - ceejayoz 12y ago
    http://en.wikipedia.org/wiki/Chiarella_v._United_States http://en.wikipedia.org/wiki/Chiarella_v._United_States
- KMag 12y ago
  > Find a hedge fund that's a little slow to update their purchase price based on market changes This doesn't even really make sense. What's the "purchase price" of a hedge fund? Getting money into and out of hedge funds is a long process, not amenable to latency arbitrage. Do you mean mutual funds or ETFs instead of hedge funds? In the case of mutual funds, there used to be mutual funds with European holdings that used European closing prices when trading in or out of the fund at the US close, allowing arbitrage based on after-hours trading. However, that bug got fixed decades ago. In the case of ETFs, they are priced by the market, so there's no such thing as the ETF itself being slow to update its price. EDIT: Actually, I think instead of "their purchase price" you mean "their order limits". In most major equity exchanges, one doesn't know who's on the other side of the trades, so one wouldn't "find a hedge fund" to trade against, but rather "find a pattern of trades" to trade against. One typically wouldn't know if that pattern represented a hedge fund, a bank, etc., or maybe several different market participants that in aggregate produced an exploitable trading pattern.
  - Retric 12y ago
    Yea, that could have been more clear. If a large fund want's to maintain say 5% apple stock and 5% IBM in their portfolio and consistently balances their portfolio based on a set interval after market changes or even at the same time every day you could discover the pattern and exploit the behavior. EX: In the next 1/2 a second their going to go from selling at 15 to buying at 16 that's almost free money.
justinator 12y ago
In high school, my team invested our fake money in our Economics class in Amazon.com, right before the stock split. The three of us couldn't have been bigger slackers (we all read and watched movies), but we won the trip to NYC to do all the things you do in an Economics Class. The World Trade Center was nice to visit, in hindsight.
- joezydeco 12y ago
  I had a similar project in my high school consumer finance class. Pick a stock and report on it. I picked this no-name company that had just IPOed because I had recently bought their 16K RAM card for my Apple ][. And their Olympic Decathalon game wasn't bad either. Too bad I didn't have $1K lying around. I was saving for a Macintosh.
  - nailer 12y ago
    For anyone else wondering http://www.mobygames.com/game/microsoft-decathlon/screenshots http://www.mobygames.com/game/microsoft-decathlon/screenshot...
  - sireat 12y ago
    I am a bit confused, MSFT IPOed in 1986 no?
    - joezydeco 12y ago
      Yes they did.
- justaman 12y ago
  When I was in high school(7 years go) and doing a sim I invested all my money in Netflix....i'm rich....
eots 12y ago
Could somebody please translate this using layman's terms?
- IkmoIkmo 12y ago
  Like many high schools they had an educational program about investing. Usually this involves some company that convinced the school that they should buy 'fake investing software' for teaching. Usually that software isn't real-time. You tend to log in to some web app, pick some stocks, and at the end of the day your returns get updated. The students with the highest return on investment usually win something, in my case it was my teacher smiling his ass off and congratulating me. In the above comment, they won a freaking trip to NYC haha. Anyway what he's describing is that usually these aren't the best written software packages. After all, it's to emulate a stock exchange for 14 year olds so they can do a project with fake stock-picking for 4 weeks. Quite often the web app trails the actual data, so people just go to the stock exchange website, see where the price is headed, then buy/sell accordingly on the fake exchange. 5 minutes later the fake exchange updates the numbers by pulling from the real exchange. It's as if you're betting on a baseball game that ended in the real world 5 minutes ago, as to who will win. Tl;dr, kids cheated on educational stock-picking programs because kids can query the results of stocks before their software does.
  - KMag 12y ago
    By the way, the easiest way around this latency arbitrage in simulated trading games is to have all trades occur at the published closing auction price for the next closing auction after the trade is placed. A trade for IBM.N at 09:43 America/New_York or 15:55 America/New_York occurs at that day's closing price. A trade for IBM.N at 16:05 America/New_York occurs at the next day's closing price. Disallow placing or canceling orders within 5 minutes either side of the particular equity's market close in order to prevent latency arbitrage and reduce disputes.

jacobolus 12y ago

In spring 1998, my 6th grade class did a virtual stock investing game (using prices from the newspaper business page, with ability to change our picks once a week or so). My big picks were Dell and Lucent Technologies, and my portfolio more than doubled in the course of 2–3 months, far outpacing the second best student, who gained like 15%. Both stocks crashed within a few years after.

Retric 12y ago

Or go pro. People make 100's of billions of dollars every year 'cheating' in the stock market... Some of it's even completely legal. Find a hedge fund that's a little slow to update their purchase price based on market changes and eat them alive. Figure out when large trades are going to happen and remove liquidity at the right time etc etc.

iheartmemcache 12y ago
How would ou 'figure out when large trades are going to happen' without violating 10b5?
- ceejayoz 12y ago
  http://en.wikipedia.org/wiki/Chiarella_v._United_States http://en.wikipedia.org/wiki/Chiarella_v._United_States
KMag 12y ago
> Find a hedge fund that's a little slow to update their purchase price based on market changes This doesn't even really make sense. What's the "purchase price" of a hedge fund? Getting money into and out of hedge funds is a long process, not amenable to latency arbitrage. Do you mean mutual funds or ETFs instead of hedge funds? In the case of mutual funds, there used to be mutual funds with European holdings that used European closing prices when trading in or out of the fund at the US close, allowing arbitrage based on after-hours trading. However, that bug got fixed decades ago. In the case of ETFs, they are priced by the market, so there's no such thing as the ETF itself being slow to update its price. EDIT: Actually, I think instead of "their purchase price" you mean "their order limits". In most major equity exchanges, one doesn't know who's on the other side of the trades, so one wouldn't "find a hedge fund" to trade against, but rather "find a pattern of trades" to trade against. One typically wouldn't know if that pattern represented a hedge fund, a bank, etc., or maybe several different market participants that in aggregate produced an exploitable trading pattern.
- Retric 12y ago
  Yea, that could have been more clear. If a large fund want's to maintain say 5% apple stock and 5% IBM in their portfolio and consistently balances their portfolio based on a set interval after market changes or even at the same time every day you could discover the pattern and exploit the behavior. EX: In the next 1/2 a second their going to go from selling at 15 to buying at 16 that's almost free money.

justinator 12y ago

In high school, my team invested our fake money in our Economics class in Amazon.com, right before the stock split. The three of us couldn't have been bigger slackers (we all read and watched movies), but we won the trip to NYC to do all the things you do in an Economics Class. The World Trade Center was nice to visit, in hindsight.

joezydeco 12y ago
I had a similar project in my high school consumer finance class. Pick a stock and report on it. I picked this no-name company that had just IPOed because I had recently bought their 16K RAM card for my Apple ][. And their Olympic Decathalon game wasn't bad either. Too bad I didn't have $1K lying around. I was saving for a Macintosh.
- nailer 12y ago
  For anyone else wondering http://www.mobygames.com/game/microsoft-decathlon/screenshots http://www.mobygames.com/game/microsoft-decathlon/screenshot...
- sireat 12y ago
  I am a bit confused, MSFT IPOed in 1986 no?
  - joezydeco 12y ago
    Yes they did.
justaman 12y ago
When I was in high school(7 years go) and doing a sim I invested all my money in Netflix....i'm rich....

eots 12y ago

Could somebody please translate this using layman's terms?

IkmoIkmo 12y ago
Like many high schools they had an educational program about investing. Usually this involves some company that convinced the school that they should buy 'fake investing software' for teaching. Usually that software isn't real-time. You tend to log in to some web app, pick some stocks, and at the end of the day your returns get updated. The students with the highest return on investment usually win something, in my case it was my teacher smiling his ass off and congratulating me. In the above comment, they won a freaking trip to NYC haha. Anyway what he's describing is that usually these aren't the best written software packages. After all, it's to emulate a stock exchange for 14 year olds so they can do a project with fake stock-picking for 4 weeks. Quite often the web app trails the actual data, so people just go to the stock exchange website, see where the price is headed, then buy/sell accordingly on the fake exchange. 5 minutes later the fake exchange updates the numbers by pulling from the real exchange. It's as if you're betting on a baseball game that ended in the real world 5 minutes ago, as to who will win. Tl;dr, kids cheated on educational stock-picking programs because kids can query the results of stocks before their software does.
- KMag 12y ago
  By the way, the easiest way around this latency arbitrage in simulated trading games is to have all trades occur at the published closing auction price for the next closing auction after the trade is placed. A trade for IBM.N at 09:43 America/New_York or 15:55 America/New_York occurs at that day's closing price. A trade for IBM.N at 16:05 America/New_York occurs at the next day's closing price. Disallow placing or canceling orders within 5 minutes either side of the particular equity's market close in order to prevent latency arbitrage and reduce disputes.