The inaugural season of this contest was met with rampant cheating and manipulation which resulted in the contest being cancelled.
The second time around, two “Joe the plumber” type winners emerged. These guys both had a lot of time on their hands and made some very risky plays to win overall. This gets to the heart of why this game is flawed.
First of all, it reinforces the “buy and hold” mentality that has so far failed the market. They have attempted to make this fair by only allowing up to 25% of any given stock to be owned in your portfolio. You can have 5 different portfolios to try out different strategies and attempt to “diversify” but there is one glaring ommission to this entire game.
Where’s the short selling?
Any healthy market is going to have short sellers to balance it out. It gets at the heart of free capitalism (which this game is not). By only being able to buy stocks at the close and sell them at the close of the day, key runs can be entirely missed.
I assume the reason for this is to ward off the “day trader” type but all it really does is prevent one kind of strategy being employed.
Forex = Gambling?
To make things worse, they’ve thrown in the ability to trade currencies. Currency trading is a leverage system. You buy units of a currency that equal a certain number of shares of that currency to trade and hope the price goes up (on a buy order) or hope the price goes down (on a sell order). Either way, it’s basically just a gamble. Currencies are even harder to predict than stock prices but at least they trade 24/7 which means you can battle your insomnia by staring at the refreshing numbers on your screen in the Forex section of your portfolio.
Gains in currency are made in small incrmemnts. you aren’t likely to see a currency change from $1.50 USD for example to $2.00. Those just don’t happen. These trade in “pips” which are points based on the 4th decimal place in the value of the currency.
I actually like trading fictional currency but it’s still essentially random. Today I bought EUR/USD at 1.24432 and have a limit order to sell at 1.24533. On 1,000 units ($100k USD) I stand to net around $1480.00 which isn’t bad considering the time it takes to make it. You have to trade like this many many times over to really make money doing it though.
That being said, it’s still gambling and still random and really not how I would invest real money. The other problem with the game is your buying and selling don’t actually influence the stock price and you can only trade companies with a value over $500m. That rules out most small caps and all microcaps. Sorry, no pennystock trading here.
All in all, I think it’s great for novice investors to learn the ins and outs of buying and selling stocks but its no way to trade or invest for real.
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