• Main proposition of the virtual trading game



    Participants in the virtual stock trading game launched recently by The Hunt through The Manila Times commenced trading shares from their respective virtual portfolios yesterday, March 1. As promised, I’ll introduce them to you one by one, purposely not to amuse you with their unique or fancy trading names but to make you get acquainted with – and eventually get a grasp of – their trading system or style to your advantage.

    I also promised to make a report on their trading activities. However, it may still be too early to have a meaningful review at this time. Besides, we do not have the space to do this in today’s column.

    Instead, let me address a pressing question posed by the contenders and the readers of the column. This should also give me the opportunity to explain the main proposition of this virtual stock trading game.

    The participants had a common reaction to one of the primary rules of the trading game: Why must all trading orders be submitted not later than 12 midnight before the day of execution?

    They find this rule a bit limiting. More specifically, they see it as a hindrance to taking advantage of real-time opportunities to ride on sudden price upswings during a given day’s trading session. This will also prevent them from day-trading (buying and selling shares on the same day), again, to take advantage of trading margins.

    They believe that real-time access is the key behind the apparent success and opulence of insiders or professionals on the trading floor.

    One of my favorite trading heroes and authority on the subject has said that this is more of a fallacy than a truth. He said, “Insiders actually have little comparative advantage over the man off the trading floor.”

    In his enduring book that continues to be widely read today, “Trading For A Living: Psychology/ Trading Tactics/Money Management,” Dr. Alexander Elder said, “One of the universal fantasies of losers is that they would be better off trading right on the exchange floor.”

    “But, being in the middle of the action does not do losers any good; more than half of floor traders wash out in their first year,” he added.

    In my long years as a stock market insider, let me assure you that these contentions of Elder are still as factual now as they were then.

    It was from Elders where I picked up my investment thesis in the stock market, which I’m also putting forward as the main proposition of this column in the trading game – that “Making money in stock trading does not mean knowing the secrets of forecasting future prices!”

    Remember, the odds to winning or losing in the stock market are stacked even at 50-50. This will explain why, at times, we may have the wrong reasons for buying a certain stock but we still make money out of it when the stock’s price goes up for some other reason. Indeed, “the coin toss is an appropriate analogy for the stock market.”

    By the way, day-trading is not exactly legally prohibited here in the Philippines but our Securities and Exchange Commission (SEC) is very strict on the practice. It conducts surprise audits on day-trading transactions very often as a way of preventing the incidence of insider trading and the like.

    List of players

    We have the final list of players. But before I proceed to introduce them, may I first apologize to all those who submitted their entries early but still did not make it to the list of final players.

    Likewise, may I also ask for the understanding of those who, despite their overwhelmingly good pictures, persuasiveness, or impressive record and extent of success in actual stock trading and investing, failed to make it to the list just the same. My apologies, too, to the past champions of my previous virtual games for not being allowed to participate at this time – maybe, we can have a contest for champions sometime in the future.

    You may also notice that we have retirees on the list. This is because this group amazingly had the most number of applicants. Again, my apologies. We just don’t have more slots to offer. Try again next time.

    Surprisingly, we have no entrants from the opposite sex – which possibly is reflective of the relative scarcity of females in the industry.

    Lastly, let me assure you that the best intentions to achieve the objectives of the contest were observed in the choice of the final players.

    Making it to the list – not necessarily on the basis of any preference – is one who calls himself the “Small-Time Trader.” He is middle-aged and from his credentials, he does not seem to be that small-time player he claims to be. He is professionally connected with one of the biggest local universal banks of the country with a stock brokerage house.

    He deals a lot with people in his job every day. One of his daily routines is hobnobbing with rich clients; rich people are known to be always ahead of the general public when it comes to news and important events.
    This could be the reason behind his confidence in playing stocks on the market. Nonetheless, he claims his trading decisions are derived from his grasp of macroeconomics.

    Another is a 20-year old lad studying accountancy in one of the big universities in Metro Manila, which is said to have one of the best records of academic excellence, although rivals say its only claim to fame is the stiff competition for parking space in the campus, nothing else.

    Kidding aside, I suspect he belongs to one of the groups of apprentice traders who are heavy on charting, technical analysis and the like. He is, among other things, a swing trader (one who buys and sells within days or so). The group’s gurus estimate they would soon have 200,000 members before the end of the year, judging from the rate people are signing up for membership.

    Imagine if all these 200,000 members subscribe to this newspaper, we will be at the top of the leaderboard in terms of circulation.

    This trading mantra of this 20-year old is to “follow your plan, cut your losses short or it will cut you short.” He could just truly be the “Swing Trader.”

    Then comes a guy who likes to be known in the trading game as “St. Michael.” In Judaism, Christianity, and Islam, St. Michael is not a saint but an archangel – the leader of all angels and of the army of God. In other words, he picked up his name probably to imply that he would be numero uno among the gladiators in the game.

    He must be past middle age, but he doesn’t look that old as he appeared in an annual report I’ve seen. He is a retired partner in one of the leading accountancy, tax and auditing firms in the Philippines.

    Our retiree is cryptic about his academic and professional background. But his circumstances have supposedly exposed him to the market for a long time now.

    His trading system is the exact opposite of that of “Swing Trader.” He resorts to fundamental analysis for his trading and investment decisions.

    We’ll proceed with the other seven players next time. Cheers!

    (The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach The Market Reader at densomera@yahoo.com)


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