failing like never before

1Apr/086

Stocksquest, A Review

There are numerous schools that use stocksquest.com, an online stock market simulation, as a teaching tool. The point of the simulation is to mimic perfectly the real stock market, the only exception being the use of fake money. Real stocks can be bought and sold at real market prices, and students can perform market research and read news articles in order to help their performance in the simulation, just like in real life (theres a lot of "real" here for a simulation) The point of course, is to show students how the stock market functions and how to make money in a relatively easy manner. Stocksquest even adds a little extra fun in, allowing teachers to create class or school wide competitions so that students can battle each other out for financial success. My high school economics class engaged in a stocksquest competition, and you can see the final class rankings here. As you can see, a few students ended the contest with ridiculously huge amounts of money. While most of the class had made or lost between 15% of their money, there were a few that ended with unrealisticly huge percent gains. Once would of course assume that these students cheated. Although in this case, cheating is rather a strong word, especially since the system invites it.

There are other online stock market simulations available, some of them as free as stocksquest, and I would highly encourage teachers to sample other sites before selecting stocksquest for use in the class room. Hopefully, some of the flaws of stocksquest that I will investigate later in this article will be evidence enough to convince teachers to select a different simulation.

Anyone that has ever traded through an on-line stock broker will no doubt notice very quickly, the simplicity of stocksquest's interface. Stocks within the simulation can only be bought and sold at market price, with no option of setting a limit price or order termination date. The only “advanced” option that the site features, is buying on margin, which also allows for short selling. While stocksquest's sparse feature set would probably not prove detrimental to a student, a better simulation would provide a better experience (obviously) and be more educational.

Last year, when I was using stocksquest, I found that occasionally, the prices of stocks within the application would drop to zero when the prices where updated. Sometimes the prices were fixed a few minutes later, and sometimes they remained at zero for up to an hour. While this proved to be nothing more then an occasional nuisance, it was a fairly noticeable flaw. Why the developers and site admins would allow such a flagrantly obvious bug to remain in their code for such a long time, is quite beyond me.

Another flaw I discovered, was not a bug in the site's code, but in the way the site was designed. Sites like Yahoo! or Google finance are usually fifteen to twenty minutes behind the actual market prices, though of course an online stock broker has to have the real time prices. But stocksquest was not just fifteen minutes slow, at times it would be up to an hour slow. Nor were continuous price changes displayed. It seems that in a desire to save on CPU time, the developers of the site decided to update prices about once every forty-five minutes (on average) and sometimes taking as long as two hours. When the real stock market is active, it is full life of vigor and moves like Kevin Love on speed, whereas the market presented by stocksquest is lethargic and slower then my ninety year old great-grandmother. I don't know where stocksquest pulls their prices from, but it does seem possible that they pull them from Yahoo! finance, which would help explain the massive delays in prices.

But what I found to be truly aggravating, was how the site handled after and pre market trading. Stocksquest completely ignored the fact that after-hours trading existed, and did not update their prices when prices changed in after hours trading. While most people do not engage in after market trading, it does not seem prudent to leave it out of a simulation. But even though stocksquest ignored after market trading, they still allowed you to perform transactions even when the market was closed. In the real world, if a person attempts to buy a stock at market price when the market is closed, the transaction simply occurs when the market next opens, whereas in stocksquest the transaction occurs irregardless of the market's status. It seems that the developers of the site put little thought into designing how the site would function.

There is if course, a reason why I know all about stocksquests flaws. In his initial explanation on how to use stocksquest, my teacher said that all stocks had to be held for a minimum of three days, as to prevent cheating. The second I heard him say that, I decided I wanted to know how to manipulate the system. I spent lunch in the computer lab and quickly discovered that stocksquest could be quite slow updating prices. A person could watch prices on Yahoo! finance and then buy a stock once the price went up on Yahoo! finance. Since stocksquest would predictably be at least fifteen minutes behind Yahoo!, it was almost like being able to see into the future. But now I knew why my teacher required that all stocks be held for a minimum of three days. Although a volatile stock may jump significantly in price in the space of fifteen minutes, it is unlikely the stock will remain high over the course of an hour, much less three days. And so, my elation was short lived.

Fortunately, my dad introduced me to another way to benefit from the system's flaws. It is not uncommon for companies to release groundbreaking news after the market has closed, which could dramatically affect the pre-market. Thus, I often woke up early just before the pre-market closed, and would check my stock screener. I usually used marketwatch.com's pre-market stock screener, which would list stocks in descending order of largest percent gains (sometimes, I also checked those with the highest losses and short-sold them). All I had to do, was check the news related to some of the top stocks in the screener, and determine whether the stock had a likelihood of staying high in price. If it was simply an extremely volatile stock that often jumped substantially in price, I tended to avoid it. But if the price jump was driven by concrete evidence, such as a corporate buyout or impressive new drug test results, which would usually imply the actual value of the company was rising and was going to stay high for a substantial amount of time, then I bought the stock. Using this system of buying stocks turned out to be extremely successful, as you can see here. Making twenty-five percent or more on one stock in the space of three days was not uncommon for me, and after I started using marketwatch's stock screener I never lost money on a purchase.

I was often accused of cheating, and I usually denied such claims. Certainly I had an unfair advantage over most of the other students, but I gained my advantage by being inquisitive and curious. The fact is, stocksquest blatantly invites "cheating," and I haven't even described the more technical methods to beating the site. In my world, if you decide to go to the bathroom while playing poker and leave all your cards face up, the other players are not cheating when they look at your hand. Indeed, I had hardly felt good being at the top of my class. If felt a bit like beating a kid with crutches in a race: you feel as though you haven't really earned the right to be happy.

The only thing I have left to say is this: teachers, please, find another site. Stocksquest just isn't all that good.

Comments (6) Trackbacks (0)
  1. I completely agree with you. Some friends and I are using this site to compete against each other in the stock market. (He chose this simulation…I would have picked a different one.) Anyway, I just recently saw that Google had terrific earnings and was already up 17% in after hours. I thought that maybe stocksquest would purchase Google at the closing price, allowing me to instantly get the 17% in the morning. Sure enough. Google finished the day 20% up from where I bought it. I’m going to keep doing this for a few days to see if he catches on. For a stock simulation site that caters to schools, this is a horrible implementation. I’m not sure how this problem got through. You’d think it would be one of the first things that the programmers would catch in debugging. Thanks for the good post!

  2. “I haven’t even described the more technical methods to beating the site”

    would you care to go more in depth on the topic you speak of? i would love to gain an edge on my class mates haha.

  3. @Dan,

    sorry I’ve been so slow to respond, I’ve been pretty busy the past few days. Unfortunately, I wrote this article a while back, and now I can’t remember very much about my experiences with stocskquest. Aside from that one main flaw that I was able to exploit quite successfully (here), I can’t remember any other “hacks.” I’ll try to run through some of my notes and see if I can find anything.

  4. Thanks for sharing your knowledge. This is very useful.

  5. Stocksquest is now offline. I have found the site http://www.HowTheMarketWorks.com and it is real-time bid/ask site with live portfolios updates. I like it better than the old StocksQuest site.

  6. One downside space is testing that only confirms what is meant to happen truly does.


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