Working with FTS Interactive Markets:  B02 Trading Case Example

Integrating FTS Interactive Markets into your finance course is easy.  This is because the primary function of any market is to discover prices.  The FTS Interactive Markets tie this primary function to the concepts you teach in the classroom.  This provides a unique way of teaching that truly exploits learning by doing. 

To see how effective learning by doing really is we encourage you to work through this "How To" below.  This quickly introduces you to how the system works by letting you immediately compete against an actual class using an introductory case.  You will quickly see that this is completely interactive so that you can both make market and take market against an actual human trading crowd!

How To Integrate FTS Interactive Markets into Your Classroom

Competing Against the Trading Crowd  

  • When you first log into the Demo you will see a dynamic screen with flashing prices.  These prices result from an actual classroom trading crowd who could both Make Market (submit Bids to buy some quantity or Asks to sell some quantity), Take Market (transmit market orders or market limit orders).  The novel aspect of this demo is that you are no longer a passive observer, instead you can immediately interact with this trading crowd!  You can act as either a Market Maker or a Market Taker in competition against this trading crowd!  Furthermore, if your bids/asks are competitive then trades will take place plus you can submit market orders in competition with the trading crowd.  In other words you can immediately practice and sharpen your personal trading skills by participating in an actual market.  Click on the above hyperlink above to see how:

The Book and Other Important Support Screens

  • The market microstructure describes the rules that govern trading.  In this demonstration case the market is conducted as a continuous double auction market.  That is, both Bids and Asks can be submitted by Market Makers.  Bids are automatically ranked in real time so the best (i.e., highest) Bid is displayed on the main trading screen and then the remaining bids are displayed in the market's trading book ranked from best to worst.  In addition, price graphs are provided in real time such that Bids are depicted in Red, Asks in Blue and traded prices in Yellow.  Click on the above hyperlink to see how this important support screen works.

How is Time and Interest Treated in a FTS Trading Case

  • In an FTS Interactive Market you are trading in a virtual world that can cover long periods of time in the real world.  That is, 1 trading day may last for 300-seconds not 6 1/2 hours.  In addition, time may cover a number of years.  As a result, each trading case is broken up into Time Periods and a set of consecutive periods make up one Trading Trial.  Click on the above hyperlink to see what happens at the end of a period in the demo case.

Trials and Periods in a FTS Trading Case

  • A powerful feature of trading in a Virtual World is that independent trading trials can be repeated.  That is, you get to start fresh and re-trade in a particular environment.  To keep it interesting the random realizations are such that independence is maintained over time.  In this way the entire Trading Crowd is able to "go down the learning curve" because they are able to practice in an attempt to improve performance.  However, recall that because the learning objectives are tied to the price discovery process this further implies that the trading crowd is learning these important concepts from actual trading experience!

Evaluating Trading Performance

  • At one level you can always measure trading performance in terms of how much money each trader made.  The FTS system lets you do this.  However, in the real world this is not the only factor by which trading performance is measured.  For example, a trader may have got lucky.  Or a trader may have placed large bets.  In the real world trading requires a lot of discipline because traders (and particular the institutions employing them) want to see consistent positive trading performance.  As a result, the FTS Interactive Markets provide a number of ways for measuring trading performance.   Click on the above hyperlink to see some of these measures.

Program Trading

  • We could continue with the powerful features embedded in the FTS Interactive Markets.  One feature that is worthy of separate attention is that users can automate their trading by program trading!  Click on the above hyperlink to see how this can be set up.

Bottom line the FTS Interactive Markets transforms the traditional classroom into a state of the art web based trading room that combines theory with practice and emphasizes learning by doing.