Rutgers—Newark team takes 1st place at international Trading Challenge
A team of Rutgers University—Newark graduate students took first place at this year's Trading Challenge.
The Trading Challenge is held by the Chicago Mercantile Exchange (CME) and accepts teams of undergraduate and graduate students from all over the world. This year there were about 600 teams from schools in various locations including Australia and China.
The members of the Rutgers team were Zhihao Zhou, Jiachen Chu, Cheng Xu, Wanyu Zhang and Chengran Su, all international students from China, enrolled as graduate students.
The Trading Challenge is a simulation of a futures market where each team is given an account with a mock sum of $100,000 to invest. The market data used in the game is based on real market data, which is tracked in real-time.
After two weeks, the teams' account balances are tallied and the top 10 percent of teams advance to a second round, where accounts are reset with a new sum of $250,000. The Rutgers team completed the first round with $186,000, qualifying them to advance to the second round. There, they finished in first place with $530,000.
Su said that the team's strategy was based on ratios, and rather than focus on the size of their investments, the team only paid attention to return rates. The larger sum they were allotted in the second round did not change their approach to the game.
“I don't think that (the amount of money) makes any difference,” Su said. “Maybe it is just for you to experience more amounts. Because in the future, if you want to be a trader you have to deal with not only $250,000 but maybe a much larger sum, like a billion or a million. It's these kinds of money. Maybe you can use this kind of competition to train your psychology when the amount is larger. The larger amount is more exciting.”
The data used in the Trading Challenge is based entirely on data from futures markets. The data tracks the futures for goods such as gold, crude oil and natural gas. Su said that the Rutgers team decided to trade only in natural gas futures. Their decision was based on the volatility of natural gas prices.
Su said that the more the price changes, the more opportunity there is to make a profit. Whereas the relative stability of a good like gold makes for a wise long-term investment, the volatility of natural gas allows for more opportunities to make a profit by strategically purchasing and selling futures.
Su said that in some ways the Trading Challenge is an accurate simulation of a futures market, but that the simulation can only go so far — in the real world, a large investment in a particular market will affect that market.
But because the data used in the Trading Challenge is based on real market data, the players' mock investments do not have any impact on the market data. Because of this discrepancy, the players in the Trading Challenge can only respond to market trends, rather than really participate in them, he said.
But despite the unreality of the Trading Challenge, Su said that he learned how to remain calm in the face of large losses — this was his most valuable takeaway from the experience.
“Maybe in the first round you think, 'Oh, 1 percent loss,' and you may feel very nervous,” Su said. “At the end, you think, '5 percent is ok, I'll gain it back later.' That is a very big change.”
Su said that the whole team was able to remain calm under pressure and that this attitude allowed them to remain focused.
He said that the team members were constantly supporting one another, even as they faced temporary losses. When their decisions did not work out as expected, they would analyze the problem and then refine their strategy.
As the winners of the Trading Challenge, each team member won $1,500. They also were allowed to attend an industry conference for market traders in Chicago last weekend.
“The result was a nice surprise, but I don't think it was the most valuable thing I gained in this competition,” Su said.