Imagine the competitive advantage you’d have over others in your field if you could practice in a simulator before your first day on the job.
It happens with airplane pilots and truck drivers and you can intern as a lawyer or a doctor but nothing can prepare you for trading stocks and bonds except, well, trading stocks and bonds.
Lawrence Robinson is trying to change that. The Chicago-based co-founder of ZeroSum Markets has created a company based on the belief that the current trading environment is full of companies that are more concerned with collecting brokerage fees than they are about providing their employees with the skills to do the job properly.
Because most traders don’t have the necessary tools, 80 per cent of them lose money in their first year, he said.
“Many lose money in the first month and don’t go back to it,” he said, noting ZeroSum doesn’t provide trading in securities or other market instruments, just in the field of play.
ZeroSum didn’t have to reinvent the wheel because its founders were fans of DraftKings Inc., a skill-based fantasy sports platform that allowed fans in North America and the U.K. to compete in single-day, online fantasy sports contests across a variety of professional sports. They adopted the business model and applied it to trading competitions. ZeroSum went live a year later.
So, how does it work?
Each competition has a number of parameters, including duration, entry fee, prize payouts and tradable instruments. They can be as short as an hour or up to a week but most are between three to five days. Each person pays a $10 entry fee, which goes towards paying prizes for the top four finishers.
Every participant trades on real market data that ZeroX provides from third-party sources and their portfolio’s performance is updated throughout the competition.
“Each competition is its own unique entity. You can make 100 trades or zero trades. We’re using trading as a way to identify the skills of the traders, rank them and reward them according,” he said.
“If you’re consistently generating top performances in competition, we can say you’re better than the average trader and could be doing really well in the real world. (The game) is an entry point into the real world.”
Despite the simulation, the game has some significant differences from the real world. For example, actual financial advisors show their abilities by beating the market, which can be very difficult to do in the long run.
“In our platform, you only have to beat your peers, which is easier than the market as a whole,” he said.
The game also offers different risk profiles, enabling participants to slap down $10 to compete against 1,000 others. If things go off the rails and you lose your shirt, you only really lose your entry fee.
“In the real world, you can lose a lot more than that, especially if you’re using leverage,” he said.