TraderEx - A Trading and Market Simulation

TraderEx is an interactive computer simulation designed to provide participants with hands-on experience in making tactical trading decisions, and implementing them in different market environments. Continuous order driven and quote driven markets are simulated, along with call auctions and hybrid combinations.

The simulation exercises are an invaluable tool for deepening understanding of how the structure of trading influences actual trading behavior.

You enter your orders into a computer-driven market that generates its own order flow, and can respond directly to your orders. You see your results in real-time and can analyze them after each simulation run. You are free to experiment with your order placement.

Robert A. Schwartz and Bruce W. Weber developed the simulation model for TraderEx. Gregory Sipress wrote the software for the TraderEx version that is available on this website. TraderEx is owned by Schwartz, Weber, and Sipress, and William H. Abrams.

The Learning Tool (excerpted from Robert A. Schwartz, Reto Francioni and Bruce W. Weber, Chapter 1, Getting a Grip on Trading, in The Equity Trader Course, John Wiley & Sons, 2006 and Decision Making in Equity Trading: Using Simulation to Get a Grip, Journal of Trading, Volume 1, Number 1, Winter 2006)

Investing calls for research, analysis, and reasoned judgment. This all takes time, for you and for others. A portfolio manager at a large mutual or pension fund may spend days, weeks, or more formulating an investment decision. But once an investment decision is made and has been passed on to the trading desk, the time clock suddenly accelerates. Prices in the marketplace can move with startling velocity in brief intervals of time. As they do, trading opportunities can pop up and quickly vanish. Your own order handling can cause a price to move away from you. Poor order placement and imperfect order timing can be very costly. Consequently, a hefty portion of the gains that an asset manager might otherwise have realized from a good investment decision can be nullified by a poor trading decision.

Perhaps you are at the trading desk of a mutual fund, a hedge fund, or a pension fund. You are an active, short-term trader, and you have orders to work. You see the numbers flicker on your screen. You follow the market as it becomes fast moving and then, sensing the situation, act. Without having the luxury of time to figure it all out, you buy the shares, you sell the shares, or you hold back.

When you act, you may take liquidity or supply it. Successful traders often choose to wait and then become active. They will not alter their approach when losses arise, and they remain steady on the plow. Decisions must be made effectively under a spectrum of conditions, including when the market is under stress, as occurs when liquidity providing orders are cancelled and a rush of one-sided orders arrives, or at a daily opening or closing when volume is high, volatility accentuated, and the clock is ticking.

It takes training to gain the experience needed to think and act instinctively. Professional traders are good only after lengthy training. Think of the basketball player who, after having spent thousands of hours shooting baskets for practice, makes a clutch shot on instinct just before the buzzer at the end of a championship game. So too with the equity trader. Only after many months of training will the good trader trade well on instinct. An understanding of the myriad forces that impact on and permeate the markets requires organized discussion, illustration and experience that does not result in your loosing money. Your experience should be simplified, precise, and focused. To this end, a trading simulation can help. TraderEx will enable you to experience tangibly the dynamics of a marketplace. The simulation will accelerate your gaining proficiency as an equity trader.

For further discussion of markets and trading, see 'The Equity Trader Course', available from Wiley & Sons. Chapter 1 of the book provides further additional information on the structure and use of the simulation model.