
The Trading Game - scottkduncan
http://www.bloomberg.com/features/2015-stock-chart-trading-game/
======
area51
The game definitely leaks information, I got better at every try -- this was
the 4th attempt:

Your returns were 329.0%, against the stock’s 139.7% and the S&P’s 14.7%. You
outperformed 100.0% of players, ranking #1.

~~~
KMag
Yea, the re-scaling algorithm is a future leak. I wonder how the developers
didn't notice.

~~~
LordKano
Yeah, there is a bit of a leak but relying on that will not benefit you when
you get Enron.

~~~
function_seven
+1 for Enron. I was getting really excited as I saw it scale out and out and
out. I knew there was going to be a huge jump and I was going to make a
massive return. Unfortunately it didn't occur to me to be more reflexive. I
think I barely managed to recoup my initial investment.

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byron_fast
Wow. Imagine your livelihood depends on that game; your salary, your bonus,
your standing. You can research the movements and HFT the micro-movements, but
you're still playing that game.

~~~
tikhonj
And then imagine the same thing but you're _not_ playing the game. That's what
happens when you have massive exposure (ie work at a company) without doing
anything to manage it. Diversification is good.

~~~
yummyfajitas
That's not really true. If the company goes bust, it doesn't affect your net
worth at all. All that happens is one revenue stream dies, and you are free to
replace that revenue stream. Your total portfolio doesn't go down at all. For
most changes in share price you are completely insulated.

~~~
ZenoArrow
From what I understand about HFT, if you know what you're doing you basically
can't lose.

To understand how, you need to understand 'put options', which is a financial
product available on the derivatives market. A put option is a deal to sell
company stock at a pre-agreed price. Worth noting that you don't need company
stock before the put option deal is reached.

So let's say the stock price of Company X is currently valued at $50, and you
arrange a put option to sell stock at $50. If the stock price goes down, let's
say to $25, you buy stock at $25 and sell it at $50, so you've made a profit
(from what I understand, you don't even need to buy the stock in this case,
the put option broker will just pay you the difference to simplify the
process).

But what if the stock price rises? Let's say the stock price rises to $75. You
can't buy stock and use your put option without losing money, and from what I
understand you pay interest to the put option broker for the length of time
you have it, so holding onto the put option causes you to lose money.

But there's a 'get out of jail free' option. When you arrange the put option
you also buy stock. If the stock price goes down, you buy more stock and sell
at the pre-agreed put option price. If the stock price goes up, the stock you
hold is worth more and you can use this to clear the put option without losing
money.

From what I understand, this is one example of 'hedging' against stock price
changes, there are probably others. HFT is well suited to this kind of deal,
as you can react quickly to market changes, minimising any risks resulting
from delays.

So although people see the stock market as gambling, you can game the system
to move the odds in your favour. The end result is huge volumes of money
invested into non-productive uses of money (and because of the ways banks
create money, and the ways the financial markets are regulated, the
restrictions on this speculation is basically non-existent).

EDIT: I've got a downvote on this already. If anything I've said is untrue,
then call me out on it.

~~~
kasey_junk
Who do you think is selling you the put option? Do you suppose they price
those such that a trivial stock pair hedge will make money? If they did that
they would be losing a ton of money & you would have replaced equity risk with
counterparty risk as they go out of business.

HFT are good at options trading for the same reason all options traders have
been throughout history. They can find misspricings in the market and trade
them while they last. HFT is taking over those trades because HFT is much
cheaper than the humans they replace & can therefore take on less high margin
mispricings than humans can.

Also options trading is a regulated marketplace much like equities &
commodities trading.

Finally 'yummyfajitas is an ex-HFT who has written good blog posts on the
subject.

~~~
ZenoArrow
>"Do you suppose they price those such that a trivial stock pair hedge will
make money?"

The example was just for illustration purposes, a simplified version of how it
works.

>"Also options trading is a regulated marketplace"

Is that right?

[https://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_e...](https://en.wikipedia.org/wiki/Derivative_\(finance\)#OTC_and_exchange-
traded)

"Over-the-counter (OTC) derivatives are contracts that are traded (and
privately negotiated) directly between two parties, without going through an
exchange or other intermediary. Products such as swaps, forward rate
agreements, exotic options – and other exotic derivatives – are almost always
traded in this way. The OTC derivative market is the largest market for
derivatives, and is largely unregulated with respect to disclosure of
information between the parties, since the OTC market is made up of banks and
other highly sophisticated parties, such as hedge funds. Reporting of OTC
amounts is difficult because trades can occur in private, without activity
being visible on any exchange."

>"Finally 'yummyfajitas is an ex-HFT who has written good blog posts on the
subject."

I would welcome yummyfajitas 's feedback. I'm not attacking yummyfajitas, if
that's what you're implying.

~~~
kasey_junk
> The example was just for illustration purposes, a simplified version of how
> it works.

Sure, but real options trading is much, much more complicated than that. You
might as well have said "Find an equity that you _know_ is underpriced and buy
that". There is no secret sauce in options trading for HFT or otherwise. Like
any market based trading profession you find a place you _think_ is
incorrectly priced, you take a position, and then you either make or lose
money. The more often you are right the better a trader you are. There is
literally nothing special about options trading vs equities trading in this
regard (except maybe leverage as options can be dramatically leveraged).

> Over-the-counter (OTC) derivatives are contracts that are traded (and
> privately negotiated) directly between two parties

You could do private options I suppose (but HFT would have a distinct
disadvantage here), but most options are traded on exchanges (I believe CBOE
is still the biggest options exchange in the US) just like any other exchange
traded instrument. The SEC, FINRA and CFTC all have rules about options
trading in the US.

> I'm not attacking yummyfajitas, if that's what you're implying.

I didn't mean to imply you were attacking yummyfajitas, only that he probably
knows about options pairs trades given that they are a very common trading
pattern for anyone who has worked in the trading industry, HFT or otherwise.

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cryoshon
This game is really easy, so it can't be realistic. I think that a lot of the
challenge is removed by the fast speed that the game makes the years go by. It
removes the challenge of waiting with what you have for a better opportunity;
I'm not sure if institutional investors would ever hold positions for years on
end.

~~~
patio11
_I 'm not sure if institutional investors would ever hold positions for years
on end._

This is extraordinarily common, particularly for institutional investors who
are not attempting to generate alpha.

~~~
Smushman
I think the main point being made by the author is that without the waiting,
day after day, combined with the external confirmation bias of hearing how
other stocks are outperforming yours (you thought you did great on your trade,
until you hear Google could have made you multiples more); you are missing a
ton of the statistical noise that screws up your trading.

Don't throw out the entire argument with nitpicking on a minor
misunderstanding re: institutional trading. The main thrust of his argument is
clearly valid.

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djhn
It's a shame I don't get 2000% returns in the real market. But I also don't
invest 100% of my portfolio on every trade. I guess that's where I've been
going wrong?..

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ISL
The game should really be named 'The Momentum Trading Game'.

Without even knowing the company's price-to-book and p/e ratios, let alone
what the company is, its past history, the market it's in, and who runs it,
it's just chasing the dance of a number.

Doing nothing, I tend to beat about 20% of the traders. Without the future
leak, it'd surely be better than that.

Edit: Just got Enron. Did nothing. Beat half the players.

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blux
The shifting of the scale on the axes gives you insider information...got to
$1B after a few tries :)

~~~
mollmerx
Insider information is known but non-public. I think it's more appropriate to
describe this as forward-looking. I.e. we are getting an insight into things
that haven't even happened yet!

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ousta
I struggle to see if the game includes all the taxes and the cost of
transactions? this is somewhat important on small gains

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tristanj
I prefer this version of the game. It's set to historical stocks from the
early 1990s to today.

[http://chartgame.com/](http://chartgame.com/)

~~~
trymas
But it's made with flash :(

~~~
cissou
stocks from the 90s delivered with technology from the 90s!

------
tux3
Fun game, but real life trading is probably not that easy!

"Your returns were 2950.1%, against the stock’s -75.3% and the S&P’s 57.1%.
You outperformed 97.1% of players, ranking #48."

~~~
lawlessone
I did ok in this game, i tried one of those plus500 demo accounts before and
got slaughtered.

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Smushman
Information leak #1: Scale Changes - noticed this but could not put my finger
on defining it clearly.

#2: Date - along the bottom edge the date progresses. Knowing generally that
the market did well during certain multi-year ranges was an absolute edge. Too
bad the real world doesn't come with this kind of information.

~~~
tophtucker
Hi I made the game. Really glad you brought up #1 — I think it's the main
problem with the game. The y-domain follows a simplified and smoothed version
of the price line, which, yes, leaks information about the future. Not sure
what to do about it. Because viscerally I _like_ the movement.

#2, yes, that too. We talked about that issue but maybe not enough. I wonder
if you even need to know what the timescale is. Stock movements are pretty
fractal and scale-invariant, after all, right? Kinda? Hm.

~~~
Smushman
I like the date information as it gives a very much needed perspective! But,
knowing the year itself may not be.

Could you drop the year indicator?

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increment_i
Pretty cool! Not something I thought would work so snappy on a mobile browser.
I made a killing on Enron!

~~~
byron_fast
Not sure if the game lets you be reported to the SEC. Maybe you're a member of
congress?

~~~
TeMPOraL
That should be a feature in Starfighter. 'tptacek?

~~~
patio11
If you play through the trading levels of Stockfighter, you'll become...
intimately acquainted with the Committee for Exchange Security (CES), the in-
universe SEC expy.

~~~
TeMPOraL
Can't wait to get through the experience!

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rgawdzik
Where's the short option?

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eddd
In short term trading your profit/loss will be probably random. Saying that
some day trades make money is like saying that some people might flip a coin
and hit heads 20 times in a row. For a big enough group of people it will
happen. Unless you are high frequency trader - then you make money every
single day.

~~~
gnaritas
> Unless you are high frequency trader - then you make money every single day.

Only if you're the fastest HFT that day, Dodd Frank and the sub penny rule
devastated HFT trading by now allowing them to bid better, so whoever is first
in line wins.

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qrybam
That was fun - almost $32,000,000 from the first run. Made a killing on DELL
(260.9% vs -61.1%).

If you keep playing, it's the same stocks again and again - would be even more
fun if there was some pseudo real time/more recent charts too.

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arca_vorago
Along these lines, can anyone recommend a good tool to test real strategies
against the real stock market, taxes, fees, etc included? Not looking for free
necessarily, just something that I could actually learn and test against real
world data with the same variety of options, futures, paper, forex, etc.

Also, I remember working on a Bloomberg machine at one point, and the license
was something like 200k a year, and I was told most of that wasn't for the
machine but for the level of data access. At what point does the data become
free?

~~~
mathgenius
Have a look at quantopian.

~~~
arca_vorago
Wow, thanks for the suggestion, that is extremely interesting how they are
doing things. Crowd source hedge fund where you can work on your own algo's...

Now the only problem is my curiosity is piqued and I feel like I'm about to
waste way too much time learning about this stuff.

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washedup
this is fun, but it gives you clues on where it will go next as the frame
shifts before big movements.

~~~
stkni
Meh, but the scale change is too quick to see if it's going higher or lower
(at least to me) so I don't think it gives that much of an advantage.

Even trying to use that information I can't seem to get much better than the
50th percentile, on average. Which is pretty much what I had before I read
your comment.

~~~
erikb
After about 30% of one round you can see from the previous trades if you are
more on the low or more on the high side though. And the moment you see (or
rather "feel") the scale change you can make a decision.

I couldn't pinpoint it as well as the comment above yours but I also feel the
interface helped a lot in making good decisions.

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Mikeb85
Played through all the stocks, got up to 96,000.00$. Pretty fun, especially
some of the stocks which tank (too bad there's no short option).

Works surprisingly well on mobile too.

~~~
Mikeb85
Well definitely gets easier. Got up to 10+ million starting from 500, and then
used that to get to 16 billion... One more round and I'm richer than Bill
Gates lol...

And made it past a trillion...

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z3t4
This is a cool game! But does it represent the real world? It seems to be a
game of reflexes. Or does ranking in the top 100 means I actually can predict
the future?

~~~
princeb
> does it represent the real world

When you are done with the game the stock ticker appears in the top left of
the chart - that was the real world price you were trading.

~~~
MasterScrat
I am not sure they are taking into account realistic transaction fees.

~~~
z3t4
It would be interesting to add standard fee's to the game.

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dennisgorelik
Is this game designed by Bloomberg to lure amateur day traders into their
system?

The games is designed in such a way that it is so easy to make big virtual
$$$$$$$.

Next step - actual trading account and $$$$$ losses (while Bloomberg collects
commission fees).

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collinmanderson
I got #2 on AAPL on the first try. I ignored the scale and just bought based
on dates: Bought asap, sold in late 1999, bought in late 2001, sold mid 2007,
bought early 2009, sold May 2015, bought mid-August 2015.

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blazespin
Stopped playing after 170B. Too bad they don't mix up the charts, kinda fun. I
couldn't quite figure out the scale shifting helping, seem more like a
momentum thing.

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vvoyer
So nicely done, would love to see the code on github thought

~~~
haser_au
It's just Javascript. You should just download it to run locally.

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doc_holliday
In the real world you wouldn't always buy / sell at the price you hit, someone
could front run or by the time your sell hits the market there could be lack
of buyers and the price will have tanked.

So this makes it seem easy, when the trade differ in real life from what might
look available one minute.

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joeyspn
1\. Click at the start

2\. HODL til' the end of time

3\. Profit

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yitchelle
This goes the show how much of a gamble it is when investing by charts.

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stupandaus
I made $1.6148008835081285e+21 LOL

The right axis scaling leaks a lot of future info...

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lgomezma
Just buy at the start and hold until the end, you will outperform the market
and most of the people.

~~~
Tepix
It's always a different stock. If you do this with Enron, you will lose 100%.

~~~
lgomezma
Of course I'm taking on an average behaviour

~~~
seansmccullough
Ya buy and hold is the way to go in real life.

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jj89
I got lucky - first try #9 on GOOGL, outperforming 99,4% of all players
[http://imgur.com/yWohi4J](http://imgur.com/yWohi4J)

and #8 outperforming 99.6% a few tries later
[http://imgur.com/75raZvr](http://imgur.com/75raZvr) \- returns 6462% on a
stock that lost 75.3% over that period

~~~
adidar83
Nice. I made $83,664 (9658%) trading $MCZ, beating the stock! And beating the
market! I beat 100% of people trading $MCZ, ranking #3.
[http://i.imgur.com/dTaCufc.png](http://i.imgur.com/dTaCufc.png)

