As you can clearly see the chart above shows my equity at the end of each trading day. It will be interesting to see what happens during tomorrows session. On average my portfolio has gained approximately 7.5%.

Some Interesting Game facts

National

• There are 13937 ranked players nationally (for a player to be ranked the must have purchased at least one listed security).
• The average national portfolio value is $AUD 49,162.12.
• 26.78% of players are in profit.

South Australia

• There are 1297 ranked players in South Australia (for a player to be ranked the must have purchased at least one listed security).
• The average South Australian players portfolio value is $AUD 49, 356.66.
• 30.15% of players are in profit.

What I found surprising was that such a small percentage of the players were actually in profit. There has been quite a bit of market volatility recently, maybe this could account for such poor performance. It is still early days I will keeping posting updates on a bi-monthly basis.

Economic Moats

In an earlier article I discussed the concept of an Economic Moat and constructed a long term portfolio based on the concept of “Economic Moats”. It has been a little over a month and this portfolio has made a small gain of $AUD 142.71 or 1.45% gain. The full performance figures are highlighted in the table below.

The fundamentals of each stock are also provided by Google finance and are shown below:

How did I come first in South Australia in the ASX share market game?

I know you are all wondering how I came to be in first position so without any further ado I will tell you. It was simply a matter of buying shares holding them until they increased in value and then reducing my holdings via pending orders. Due to rules of the game, the pool of shares I could choose from was only 100 companies and could not short sell. As I do with any problem I face I try to break it down into its component form.

Components involved

After initial brainstorming, I came up with some very broad components that would need to be implemented in my strategy. These components are interrelated below is a simplified view of the various components that need to be considered:

Given this information, the best strategy I could use would be to select stocks that were highly correlated and stay out of any stocks that had exposure to the subprime. I did choose one banking sector stock as it had a quality loan book and no US market assets. My portfolio was heavily weighted to the resource sector with exposure to Gold, Zinc, Copper, Aluminium, Bauxite, Uranium and AUD/USD spot prices. Below is a chart showing my performance throughout the trading period. You can also see where I scaled back my resource market holdings.

As you can see in the final two weeks if I did not alter my strategy, my portfolio would be worth $3000 less and I would not have been in first place.

Game Statistics

National Performance summary

Conclusion

Although it was very humbling that I came first in the state and 13th in the country, the strategy that I used was highly risky and in the real world, I would not undertake such risk. In addition, I am reminded of a Ron Chernow quote:

“As a bull market continues, almost anything you buy goes up. It makes you feel that investing in stocks is a very easy and safe and that you’re a financial genius.”

At the end of the day winning the state division doesn’t mean a hell of a lot, my bank account is $1000 dollars better off, I don’t suddenly now consider myself to be an expert trader. I will continue myself education process and I believe entering these simulated trading games has helped my understanding of the markets.

The Trading PeriodThe first day of trading in the Game is Thursday 6 September 2007 and the last day of trading is Wednesday 14 November 2007 (”Game Period”).

Trading hours indeed reflect the true nature of ASX trading hours making the simulation more realistic

An order to buy or sell shares may be placed at any time of the day during the Game period. Orders will only be matched during the trading hours of the ASX market (which is usually 10.00 AM EST and 4.15 PM EST). Orders in the Game are not matched until they have been matched on the ASX market (i.e. if a participant places an ‘at market’ order to buy or sell a parcel of shares, it will not be executed until there is a match on the ASX market). Orders placed ‘at market’ when the ASX market is closed will be processed at the opening trade price on the next trading day. ‘At market’ orders will be processed within the limitations of the stock volumes available for trading in the ASX market. ‘At market’ and ‘at limit’ orders that can be filled will be processed continuously from the time the ASX market is open at 10:00 AM EST to the time the ASX market closes at 4:10 PM EST*.

* PLEASE NOTE – the Game seeks to emulate certain aspects of the ASX market, therefore orders placed from approximately 4:00 PM EST to 4:10 PM EST may still be on-market trades due to the Closing Single Price Auction (CSPA) that takes place at approximately 4.10 – 4.12 PM EST Further, when there is a price sensitive announcement received after 4.00pm and less than 10 minutes before the CSPA, the security is placed into a pre-open state and will not take part in that day’s CSPA. The security will remain in pre-open until the opening auction the following business day.

Buying and selling shares in the Game. Here is where additional rules were added to limit the number of transaction that can be carried out in a day and a diversification rule.

Company list

Only shares in the 100 ASX nominated companies that are part of the ASX nominated list (the ‘Company List’) may be traded. Ordinary shares and bonus shares are the only classes of securities that may be traded in the Game. Other classes of securities such as company options cannot be traded in the Game.

Hypothetical starting cash

Each participant will commence the Game with a theoretical AUD$50,000.00 with which to purchase shares. Surplus funds may be left as ‘cash-on-hand’. The ASX Group reserves the right to amend a participant’s ‘cash-on-hand’ funds if any errors occur. However, the ASX Group accepts no liability or responsibility for any loss or damage from any error or the correction thereof.Minimum marketable parcelIf a participant wishes to purchase shares in a company, shares can be purchased in any dollar amount. There is no restriction on how many shares or what value of shares may be sold.

25% diversification rule

A participant cannot purchase a quantity of shares in one particular company which results in the value of the participant’s total holding in that company comprising 25% or more of the participant’s total portfolio value at the time of purchase.This rule is not breached in the event that the share price of a particular company that is already held by the participant increases such that it subsequently results in the company comprising 25% or more of the participant’s total portfolio value, accordingly, the participant is not required to sell that stock.

Placing an order

At market ordersAn order to buy or sell stock in the Game must be placed via the Trading page. Orders can be placed ‘at market’ or ‘at limit’. If an order is placed ‘at market’, the next price for that stock, after the order is received, will be used to process that order. The quantity of shares requested will be either filled in its entirety or partially filled according to the last volume traded for that stock on the ASX market.

At limit orders

If an order is placed ‘at limit’ the participant must nominate a price at which they are prepared to buy or sell the stock and the order will remain in the ‘Orders pending’ section of the Trading page until the last sale price (in the case of a buy order) or the last buy price (in the case of a sale order) in the ASX market matches the participant’s nominated price. The quantity of shares requested ‘at limit’ will be either filled in its entirety or partially filled according to the last volume traded for that stock on the ASX market.

Brokerage is the final component of the game rules. The brokerage charged roughly reflects the industry average.

Brokerage will be charged against the theoretical trade value on each purchase or sale of stock at the rate of AUD$30.00 for each trade for orders valued up to and including AUD$10,000.00. For each trade over AUD$10,000.00, brokerage at the rate of 0.3% of the trade value will be charged. To simulate ASX market conditions, the brokerage fees include GST.If an order to buy or sell shares is partially filled, brokerage will be charged only on the dollar value of shares that have actually been purchased or sold. The Game will however keep a record of brokerage that a participant was charged when the first partial order to buy or sell shares was executed so that a participant will pay no more brokerage than the standard rate set out above. For example, if a participant wishes to buy 5,000 ABC Company shares at AUD$1 each and only 2,600 are filled the participant will pay AUD$30 brokerage. When the remaining 2,400 shares in ABC Company are subsequently executed the participant will not be required to pay additional brokerage as the total amount of brokerage paid on 5,000 shares worth AUD$1 each (AUD$30) has already been paid. If a participant ordered 25,000 ABC Company shares at AUD$1 each and 10,000 are filled (AUD$30 brokerage paid) and the order for the remaining 15,000 is later filled, the participant will pay brokerage of 0.3% on the outstanding 15,000 ABC Company shares.

Source https://www9.asx.com.au/Smg/CharityRules

I have been a bit slow out of the blocks this year and will make my first trades in the game today. If you are an Australian resident and want to sign up for the next game starting in 2008 you can do so at the ASX web site.