What's it like to take part in a virtual trading competition designed for MBA students? Members of the top-performing teams in a recent stock market simulation, organized by the Indian School of Business' finance club and TrakInvest, talked to TopMBA.com about their experiences.
The competition, known as Beat the Street, saw students from schools such as CEIBS, UNC Kenan-Flagler and the Great Lakes Institute of Management disrupt their already precarious sleep cycles in order to trade on the world’s markets using virtual trading software built by TrakInvest. Some teams featured relatively seasoned traders, like Gaurav Garg, who says that he, "started following stock markets in 2008 when [his] father invested for the first time in a stock and it fell by 75% within a month of its IPO." However, other teams were composed of students with little investment background and who were therefore looking to expand their knowledge in this regard.
Jaime Ispizua, a student at CEIBS, spoke about the amount of time the virtual trading competition demanded. "The challenge, for sure, was time management. As we are also full-time MBA students, interacting with the tool all the time was pretty tough, and, as the tool is fed with real-time information, keeping track of the investments in markets that where in other parts of the world was challenging as well. But, this kind of challenge is where we got the most out of the competition."
Participating teams utilized a variety of virtual trading strategies, from aggressive to flexible. "As we only had one week to increase our initial capital, we decided to go for a risk-seeking strategy, so we were looking for very volatile stocks that would help us maximize our profit, but this kind of profile also requires a lot of time investment since we needed to watch the behaviour of the stocks," explains Ispizua.
Meanwhile, the team from UNC Kenan-Flagler focused on momentum, as team member, Kohei Ichise says. "Considering the nature of this game – a short period and required absolute return - we aimed at stocks which: 1) were already starting to surge up or declining pre-market or were in the first 30 minutes of trading; 2) had a catalyst and 3) had a small cap with high volatility as well as certain trading volume."
Flexibility was a must for teams as the virtual trading simulation used real-time stats and stocks. For a second team from CEIBS, this meant a complete shift after only the second day, according to team members Yi Ren and Cynthia She. "After analyzing news and information during the weekend before the competition, we chose our first portfolio of stock. However, at the end of the first trading day, we found ourselves suffering considerable loss. After discussing the situation, both of us decided not to change our portfolio. Then during the second day of trading, we experienced further losses. After the second day, we decided to change our portfolio by analyzing the momentum of stocks, we decided on a couple of long stocks with significant upward trend, and short stocks with downward trend. This momentum strategy proved to be effective on the third day, and after that, we utilized the time lag between different markets."
Time lag between markets, especially those in China and the US, proved to be a key factor for almost every team. However, Garg found the experience to be thrilling. "I was motivated to trade from early morning to late night. As it [the competition] simulates 10 markets (NASDAQ, SGX, NSE, LSE etc.) I learnt about many new stock names, I had to follow news on FED rates and any major news that might lead to a change in the price of a single stock in order to try and stay on top of the leaderboard."
Cynthia She and Yi Ren also found time differences to be lucrative. "We utilized the time lag between different stock exchanges in different regions to increase our turnover rate, thus maximizing profitability."
On the whole, those who participated cited the benefits of the competition's learning experience and the chance it afforded to compete on a global level. For Kohei Ichise's team, the real takeaway was the realism of the simulation. "Since we felt fears even in simulation, we can easily imagine how many more fears there would be if we were to trade stocks with real money. We learned that we have to be objective, believe in ourselves and get over our emotions, which can lead to making unreasonable decisions."