Stock Market: The Wall Street Trading Game

Inspired by Working Money's recent reviews of two new investment games (see "Games Investors Play" at www.working-money.com), the games-happy staff of Technical Analysis, Inc., once again convened at the popular Elliott Bay Brewery and Pub across the street to engage in an educational game designed to increase our knowledge of the stock market. This time, the game in question was Stock Market: The Wall Street Trading Game by Herbko International, Inc. We were fortunate to be joined by a true novice, which gave us a chance to determine if the game is indeed what it's made out to be. Did it pass the test? Let's find out.

IT'S ALL ABOUT THE TRADING

The game does a reasonably good job of mimicking the reality of the trading floor. One player acts as the broker and all others are "assistant brokers." The broker announces the open and close of the trading floor and reads news events and stock prices after each round. The assistant brokers take turns at trading stocks. Each can buy, sell, or sell short?. Commissions are paid on every trade. It's the assistant broker's responsibility to record every trade he or she makes.

The objective of the game is to make as much money as possible by trading stocks. Each player starts with $10,000 and can trade a limited number of stocks. Each stock has a maximum and minimum price and must trade within that range, unless it's the subject of a news event. The price range provides a benchmark and helps the player decide whether a stock should be bought or sold. Any stock that is close to the top of its price range would ideally be a prime shorting candidate. And just like in the real world, if you opt to short a stock, you must do so on margin?.

It's not a game that can go on forever and ever, either: Before starting the game, all the players must agree on the time allocated for playing it. We decided on a one-hour time limit. It is also a game that lets you study human nature: Although it was slow in the beginning, it was interesting to watch the players involved be overcome by the fear and greed typical of traders as the game progressed.

Our novice among us, Joe, had no knowledge of how to short a stock, but once he grasped the concept, he was willing to risk it all by selling short 2,200 shares of Webnet stock. You can imagine his anxiety and eagerness as he awaited the anticipated drop in the stock price. Interestingly enough, most, if not all, players sold short the same stock, although they diversified their risk among several holdings. Did risking it all pay off for Joe?

One hour into the game, the closing bell rang and the market was officially closed. But for some reason, the sound of the closing bell was drowned out in the hubbub of the pub and the game continued into extended trading hours, instigated by none other than Joe himself. (He was still waiting for the price of his one stock to drop.)

A few minutes into extended trading hours, news hit that Webnet had incurred a sizable loss for the year and the stock decreased by a few dollars. You could sense Joe's relief when he covered his position. Blessed by that stroke of luck, Joe came out ahead to the tune of $36,000. Not too shabby for a first-timer!

Although the game was an enjoyable and educational experience, Joe wasted no time hitting the pool table once it was over. Stock Market: The Wall Street Trading Game, clearly, is a game that can teach the novice a little of what it's like to be on the trading floor - and in the convivial atmosphere of a bar, no less.

Editor Jayanthi Gopalakrishnan can be reached at Jayanthi@Traders.com.

RELATED READING
Penn, David [2001]. "Games Investors Play," Working Money, Volume 2: April.

Copyright © 2001 Technical Analysis, Inc. All rights reserved.