1. Trading Period & Initial Cash Balance: The Desert Mirage trading simulation begins on November 30th 2009, at 9:30 a.m. (New York time). The initial stage will end on March 26th 2010, at 4:00 p.m. (New York time). Each player will begin with a balance of $1,000,000.
2. Trading Account: at the beginning, each participant will create an account by choosing an alphanumeric username (FIFO method), and by providing the full name and a personal e-mail address
3. Initial Portfolio: the first stage will allow trading three types of securities: (a) equity stock indeces, (b) FX and (c) commodities. The stock indeces included in the initial portfolio represent the performance of the stock market of five nations and they reflect investors’ sentiment on the state of those economies. These national indices are composed of the stocks of the largest companies, such as the American S&P 500, the British FTSE 100, the German DAX, the Chinese Shanghai and the Japanese Nikkei 225. The FX product included in the initial portfolio is the EUR currency, quoted in USD per 1 EUR. The commodities included in the initial portfolio are gold and oil, quoted in US dollars.
4. Initial Portfolio Allocation: prior to November 30th, each account should set the individual allocations as percentage points of the total investment. For instance, an even allocation across all the aforementioned securities would mean a level of 12.5%, or $125,000.
5. Portfolio Reallocation: on a weekly basis, each account could reshuffle the investment portfolio by setting new allocations as percentage points of the total new balance. If the owner of the account does not wish for a change, no action is required.
6. Trading Securities: there are four basic ways to trade securities: buy, sell, short sell, and short cover. When buying a security, you are taking a long position (L) with the hope that the price will increase. When you sell a security, you close that long position. When selling short a security, you are taking a short position (S) with the hope that the price will decrease. That is accomplished by selling a security that you borrow from the broker and later you buy it back ideally at a lower price. When you buy the security to pay back what you borrowed, it is called covering your short position. In the initial phase, the account owner could choose between: a long position (bullish view) or a short position (bearish view). Selling a security and short covering are accomplished each time the trader chooses to rebalance the portfolio.
7. Trading Times and Prices: the initial phase will consist of once-a-week trades (i.e., long/short positions) that will be executed at the Friday 4:00 pm NY closing prices. Trades could be placed anytime during the week, but they will get executed over the week-end at the aforementioned prices.
8. Trading Orders: each order should contain the username, the allocated capital for each security (see portfolio allocation) and the long/short position for each security (see trading securities).
9. Commission Fees: during the initial stage no broker’s commission will be applied.
10. P&L Ranking: a table containing the full ranking of the traders’ Profit & Loss (P&L) will be available and it will contain the username and account balance only.
11. Confidentiality: no other information, except details included in the aforementioned P&L table, will become publicly available on my blog
12. Restrictions: during the DM initial stage trading is limited to one order per week
15. Disputes and Errors: the possible errors/disputes will be settled by a common sense approach such that the inconvenience would be minimized
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