Playing with the forex markets as a game has been very instructive.

[randomness]

Broadly speaking, what it's taught me is that I am terrible at market timing*. The foreign exchange markets are an excellent place to learn that. Even better is when you're learning that lesson with play money.

I managed to lose about a quarter of my fictional balance in less than a year, even without leverage. I'm sure one could manage to lose that kind of money a lot faster using leverage!

It wasn't even that I was losing money by trading too often. I think during the period I was trading I made fewer than one trade a month. However, I was quite good at guessing wrong. You could have guessed more wrong if you'd tried, but it would have taken effort. Most of my positions ended up being losing ones.

Speaking of which, I also realized that while the graphs are pretty and the quasi-real-time quote board can be mesmerizing, I just couldn't summon up the focus necessary to stay on top of the markets.

A bit of self-knowledge and humility bought at the price of a small amount of time, and no money at all. I'd call that a win.

---

*As the article says, "Whether market timing is ever a viable investment strategy is controversial."

Comments

[contrariety.livejournal.com]

Related story: You know, my dad played the stock market and did quite well during the dot-com boom. But then during the dot-com crash he lost it all, and was like, "Oh, I have learned my lesson!" But several years later, in 2008, he started bragging about having made money shorting stocks. And I was like, "Dad. Dad. This is not going to end well. Ordinary people do not make money on the stock market. The game is not built that way. I thought you KNEW THAT." And you know what? It did not end well.

Lesson: Ordinary people with ordinary sources of info do not make money on the stock market/comparable forms of financial exchanges. You might THINK you're making money if you happen to be in the middle of a big trend where there's one simple thing to do that will consistently work for a while (like shorting during a huge disastrous downturn) but it WILL NOT END WELL.

And now, I will stop preaching to the choir. :)

Playing with fake money is awesome, btw. I've always had a vague idea of trying something like that to see if I could learn anything, but I don't get around to it.

[cerebralpaladin.livejournal.com]

Yeah, that seems like time and no money well spent. :)

[digitalemur.livejournal.com]

If you see this comment in the next 3 hours, listen to the middle of Series 2 Episode 3 of John Finnemore's Souvenir Program, where they talk about alchemy.

You'll have to listen to see why it's relevant. :)

[achinhibitor.livejournal.com]

I've seen analyses that claim there are strategies that beat the market, but they claim for various reasons the professional investors can't use those strategies, so they might possibly be right. But you're not going to beat the pros in a game like forex, where the pros can hire a platoon of economists to predict the future. The way to make money is to own the casino...

[dirque.livejournal.com]

Haha, you should start a fantasy league forex.

I think with forex the issues are that long term trends are measured in days. short term in seconds. With arbitage, it's never X vs. Y, it's usually X vs. A........K vs. Y. I don't think I'd attempt to play with real money without a lot of quant assistance.

Also, do you trade with stops? I mean, maybe your picks are fine but the suck whenever you look at it?

That said, I've been having a lot of luck with the 4 days down buy , 4 up sell strategy in simulation.