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illumintai

Investment Competition Advice

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Dear all,

 

I am an economics student and about to start competing in a portfolio competition. I am given 50 trades for 3 months (in european stock markets), so i guess I will have to buy at the beginning and keep it as it is til the end.

 

One trouble is, though I have a rough understanding of the markets, i need a practical stock selection book, something i can cram for a week and analyse the charts/use some free online tools to screen the best stocks to keep for 3 months (please recommend a free screening tool !)

 

I have done an accounting module as well as corporate finance one, from which i got a first class (UK system), but surely its far from practical.

 

So, please advise what I should do.

 

Thanks

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try taking 10 diversified stocks with good price volatility, exit any position that goes against you immediatly, and hold the ones that stay positive. some chart reading and earnings anticipation may help your odds but this is all i can think of doing in 3 months. good luck man.

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To win a competition you need specialisation in the sectors which are going to do well in the 3 month period. I wouldn't worry about specific stock selection unless it's for fine-tuning between a few leaders in their sector.

Your task will be to identify the industry sectors most likely to benefit from the economic conditions in future months. Not easy I know, but get the right sectors and concentrate on the leaders in those industries. Don't over diversify, 8-10 stocks in 3 sectors is my thought.

If it were now I'd take a chance on the beaten down banking sector for starters, regardless of how you see interest rates moving, they're due a bounce.

Once your stocks are performing (or not) you should look to reduce the number of stocks by selling the weaker performers on dips and increasing your holdings of the winners. Don't put too many eggs in one basket though, 5 stocks should see you through to the competition end.

Don't be tempted to take profits too quickly, you need to run your winners to come out on top. That means increasing your holding on pullbacks.

Finally, don't overtrade. When the whole market is underperforming, your stocks will too. You will require patience at times.

Good luck in the competition.

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If you want to win rather than just "do OK" you need to go all in on the highest risk bets you can find. You need to keep aggressively pyramid using all the margin available to you.

 

Sadly the tactics for winning competitions are quite different to those for successfully investing or trading.

 

Or maybe I am just a sceptic :)

 

EDIT: If you can get two 'accounts' it is much easier.

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The guy asked for a stock selection book. Any ideas? Illuminati (if that is your REAL name) , unfortunately the majority of authors in this industry cannot trade, so they sell books. those who can't, teach. I'm sure you run up against that in school plenty of times.

 

If there was one book that you could cram in a week, then win an investment competition in three months, I'm sure we would all like to know which one it is.

 

Bottom line here - you need to get lucky. I don't know how you are graded on this, but if it is only on performance...

 

I would find some cheap stocks that are in motion, buy ten or fifteen, after a month sell the losers and dump all of the money into your winners. Ride the next 2 months.

 

This kind of fits in with Blowfish's sound advice.

 

(Or put it all in google.)

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Illuminati (if that is your REAL name)

 

And waveslider is yours ???

 

:\

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Sadly the tactics for winning competitions are quite different to those for successfully investing or trading.

 

Or maybe I am just a sceptic :)

 

Your spot on there. I've entered a few competitions like this and the difference between first place and last place is always that first place has one extremely positive outlier while last place has an extremely negative outlier.

If your trying to win and there are 20+ people in the class your best strategy is to put on 10 of the highest risk, correlated bets you can find and pray.

Obviously, if your being graded on building a real world/real money portfolio then this doesn't make sense. If your just trying to win though diversification is the enemy.

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Yeah, if your goal is to win, you'll need to take some big risks (even some with slightly negative expectation) to put you ahead. These kinds of trading competitions promote very little "good" trading/investing.

 

If options are available to you, use them (you'll be able to get paid for more risk prema). I won an economics "investment competition" once by lobbying for use of derivates ("But, real investors and traders can use them!"), and then loaded up on risk. Classmate's account ballances were not known, so I had to guess how much I'd need to win. I ended up winning by 140ish% after some very lucky SPY OTM options.

 

The whole thing was a joke, because grades for the assignment were handed out on a bell curve based on account performance (top 20% got A's, next 30% got B's, next 40% got C's, and the rest got D's; if you didn't trade, you failed :) ). Additionally, The winner got 5 bonus points on the next test.

 

My overall strategy was to shoot for first, settle for a B (the top 50% got A's and B's, and it's extremely simple to make that group).

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I obviously want to win this.

 

Can I just ask if anybody might be willing to offer some stock tips in the european markets ? i ploughed most of my assets in to oil firms and the result hasn't been so good. Need to save my portfolio !

 

Please help

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Oil companies are well priced in terms of the price of oil, so it's not like you're getting a wonderful bargan. I don't know much about the European stock market, but make some high volatility earnings plays. Risk is your friend, if you're looking for first place. Small cap companies often have high volatility as well.

 

Are you allowed to short stocks?

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long only.

 

although I accept efficient market hypothesis explains all future cashflows to be discounted into the current share price, many reports suggest oil price to increase. Is this expectation also discounted into the current share price ?

 

Surely future profit of oil firms is calculated based on CURRENT oil price.... if I expect the oil to increase steadily in the next 10 weeks, can i expect oil firms' share price to increase by a similar amount ?

 

Thanks

Edited by illumintai

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Illumintai reports simply tell the past, just like charts. They report what has happened and project future price from past performance. Usually when everyone says the market is going a particular direction, the market has a tendency to do the opposite. Especially when it is non traders (such as many economists) predicting so. When everyone is buying, who is left to sell?

 

Avoid taking the easy trade, which in my opinion Oil seems to be. Making a gain in 3 months when you haven't traded before is more a gamble rather than performance based. My thoughts would be to tackle it from a deviation from the mean or average price. Put up some basic EMA's on the weakest performing sectors for the market you are trading. As you can't trade short, buy the ones that are the furthest underneath the EMA's and gamble on a return to the average or mean price.

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Hi all,

 

Just an update half way through the competition.

 

In the first two weeks I portfolio was -27%.

 

Ever since then I cleared up most of my oil and gas stocks and added the most volatile 2 stocks with 7 financials.

 

2 most volatile ones were housing companines incidently (not mortgage related) and have been the best performers so far.

 

Thanks to your advice I am now, although still in negative territory, at -4%

 

6 weeks to go, hopefully I will end up in the top 10 (currently +15% is on top 10) !

 

Thanks again.

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