How to win a online trading competition

Most online stock trading contests encourage risk taking. only those with concentrated positions in most risky single name stocks or leverage etfs have a shot to win. 

 

The correct ranking should compare return AND risks. Just comparing performance itself is meaningless. The top 2 in recent CNBC contests are all in leveraged vol funds, and both admitted they would not invest personal money in those type of investments.

 

How can Mahhattan College beat Duke in college basketball? Hold the ball to burn the clock, and shot a three pointer at the last second. Most likely they will still lose, but at least they have a chance to win.  

 

Also, the correct benchmark for very frequent trader is NOT SP500. it is risk-free rate. When you generate uncorrelated returns by going long and short, your acct equity should have a beta of zero. 

 

Also only real money counts. the current contests encourage risk taking, instead of nurturing the correct trading mentality. smooth equity curve builds confidence and allows compounding to work its magic overtime.

 

 All professional traders eventually move to the most liquid instruments, typically futures contracts. taking on risks not priced/rewarded by markets will bleed one's account to zero overtime. I short term, due largely to luck, however, excessive risks allow you a chance to win a meaningless competition.

 

just my 2c.