Stock Market Simulation 2323

Brianti, Alessandro; Gupta, Aman

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Stock Market Simulation 2323

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This project is a seven-week stock market simulation conducted to understand market trends and develop effective trading strategies. Three different trading methodologies were employed: index fund trading, options trading, and swing trading, each with an initial investment of $100,000. These strategies were applied to a diverse set of stocks, with trading decisions driven by market analysis and current financial data, aiming to gain a profit within a realistic trading environment. The simulation's comprehensive approach involved testing both conservative (index fund) and active (options and swing trading) investment styles. The results demonstrated a spectrum of outcomes: the index trading strategy yielded a return of 4.5%, the options trading strategy ended with a net decrease of 9.53%, reflecting the high-risk nature of the strategy, and the swing trading approach, while actively managed, concluded with a slight loss of 2.63%, indicating the challenges of timing in a volatile market segment. The S&P 500 index had a 4.9% increase for the same period. These findings contributed valuable insights into trading behavior, offering a foundation for future investment strategies, and enhancing the financial acumen of participants. Comparatively, the S&P 500 index experienced an uptrend during the simulation period. The paper delves into the effectiveness of each trading strategy in relation to the broader market performance. These findings contribute valuable insights into trading behavior, offering a foundation for future investment strategies, and enhancing the financial acumen of participants.

This report represents the work of one or more WPI undergraduate students submitted to the faculty as evidence of completion of a degree requirement. WPI routinely publishes these reports on its website without editorial or peer review.

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