Stock Market Simulation Game

  Do you play games? I do. Stock market games that is.

   Here is a stock market game you will love and not only that, it will give you a great insight into the phrases "expectancy", "draw-downs" and "position sizing".

  What is the expectancy of your trading system?

  Expectancy is how many times you expect your trading method to give you a profit. Once you realize the average parameters of your trading method not only does making money in the stock market become almost "scientific" it will reduce your stress and have you trading in a professional manner.

  Here's the game:

  Cut out 100 small blocks of white paper. Make them all the same size and just large enough to write two figures on them.

  Write on the blocks in this order:

3 = 10W

7 = 5W

40 = 2W

10 =  Nil

35 = 2L

4 = 5L

1 = 10L

  So what this no represents is you M.S.T.S. in a statistical form.

  Fold all the pieces of paper and place into a hat.

  Get a piece of paper and write $10,000 on the top of that paper. This is your trading account.

  Now write down "each trade is done with $2,500"

 Stop loss is a t 8% = $200

 Write down "trade 1 =.........."  Draw your first random piece of paper from the hat.

  Read it. Let's say you had some REALLY bad luck and draw out a 5L paper. This represents a trade where you had to exit at a 5 * stop loss.

 Your first trade was a 5L loss = 5 * $200 = $1,000

  Your total trading portfolio is now: $9,000

 Your position sizing is $2,250

 Stop loss = $180

  Do it again.

  This time you hit a winner. A 2W

  This represents a 2 * stop loss gain = 2 * $180 = $360 gain

  Portfolio is now: $9,360

 Position sizing is: $2,340

 Stop loss= 8% of $2,340 = $187

   Do it again.

This time you hit a ten bagger. That's a 10* stop loss gain = 10* $187 = $1,870 gain.

 Portfolio is not at: $11,230

   And so on.... draw out 100 times and note:

1) How much draw down your trading method has.

2) How many losing streaks and winning streaks you had.

3) How did you feel when your system was performing at its worst?

4) How did you feel when your system was performing at its best?

5) Play around with different position sizing rules. go from one extreme to the other and you will be AMAZED at the equity swings your trading account experiences and the total return on your trading account after 100 trades. This should really drum into the importance that position sizing plays in your trading plan.

   Once you are comfortable with your trading method and know how it performs trading for money becomes almost a "sure thing". Every system goes through good, bad, so-so times. But as long as you are prepared for this and adopt a professional trading approach with a proper trading plan, there really is nothing to stop you from succeeding in your stock market career.

   Get busy and get serious. Start playing the stock market game now.

  Sincerely

 Mark Crisp