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Leverage, short selling, diversification and managing risk.
14 entries
1100s–1600s
Merchants pool money to send ships, and a share of a voyage becomes a share of a company.
A merchant sailing to Alexandria or Constantinople needed money for cargo. Under a commenda contract, investors who stayed home put up the money and the travelling merchant did the work. If the ship came back, they split the profit, often three quarters to the investors and a quarter to the merchant.
If the ship sank, investors lost what they put in and nothing more. Many people could each own a slice of many voyages instead of betting everything on one.
💡 Why it made sense then
One voyage could make or ruin a family. Splitting a voyage into pieces let people share the risk, and owning pieces of several voyages spread it further.
Ideas it gave us
A share is a single unit of a company's stock. The number of shares you own divided by all shares outstanding is your percentage of ownership.
🎮 Game shares can be bought in fractions, so any amount of play money buys some. Your percentage of a listing is your shares divided by its 200,000 total.
Open the full entry →Diversification is spreading money across many different investments so a loss on one has less effect on the whole portfolio.
🎮 ETFs let you invest in a whole group of people at once.
Open the full entry →1600s–1790s
Shares trade in coffee houses and bourses, the first bubbles burst, and governments borrow from the public.
Isaac Le Maire, a former VOC director, sold VOC shares he didn't yet have, planning to deliver them later at a lower price. As the price fell, shareholders complained.
In 1610 the authorities banned the practice, the first known rule against short selling.
💡 Why it made sense then
If you believe a price is too high, selling now and buying later is the way to act on it. Those who own the shares see it as an attack, which is why short selling has been argued over ever since.
🎮 In Journey Shares
You can short any listing through the game's bank, with 150% collateral.
Ideas it gave us
Short selling is borrowing shares, selling them, and buying them back later, to profit if the price falls.
🎮 Short any person through the bank once your account is big enough, with 150% collateral like real brokers require.
Open the full entry →1929–1950s
The Great Depression leads to deposit insurance, securities law, margin rules and modern economic statistics.
In the late 1920s, many investors bought shares with as little as 10% of their own money, borrowing the rest. When prices fell in October 1929, brokers demanded more cash, and those who couldn't pay were sold out, pushing prices lower still. On Black Tuesday, 29 October, the market plunged.
💡 Why it made sense then
Borrowing made gains look easy while prices rose; the same leverage made the fall far worse.
🎮 In Journey Shares
The game's bank lends up to half of what your stocks are worth and sells them automatically if your own stake falls below 25%.
Ideas it gave us
Buying on margin means borrowing money from your broker to buy more stock than your cash alone allows, using your investments as collateral.
🎮 The bank lends for margin buys under Reg T, with a margin call if your own stake falls below 25%.
Open the full entry →A margin call is a demand from your broker to add cash or sell investments because your own stake in a margin account has fallen below the required minimum.
🎮 If your own stake in your stocks falls below 25%, the bank sells shares to pay down your loan automatically. If selling doesn't cover it, the bank writes off the rest.
Open the full entry →Leverage is using borrowed money to increase the size of an investment, which magnifies both gains and losses.
🎮 Borrowing on margin at the bank is leverage: with half borrowed, a 10% move in your shares is about a 20% move in your own money, up or down.
Open the full entry →The Securities Act of 1933 made companies publish a prospectus before selling shares to the public and held underwriters responsible for its accuracy. The Securities Exchange Act of 1934 created the Securities and Exchange Commission and gave the Federal Reserve power to limit borrowing to buy stock.
💡 Why it made sense then
In the 1920s buyers often knew far less than sellers. The laws aimed to put the facts in front of every investor and to curb the borrowing behind the crash.
Ideas it gave us
An underwriter is the investment bank that manages a new stock or bond issue, pricing it and selling it to investors in return for a fee.
🎮 The player who lists someone acts as their underwriter: they earn 1% of every buy in the listing's first week, paid by buyers on top of the price. Listings the game itself creates pay nobody.
Open the full entry →Information asymmetry is when one side of a deal knows more than the other. It can cause adverse selection, where bad products or risks drive out good ones.
🎮 The house bots use only public information: prices, moves, trade counts and vouches. They never see your trades before they happen.
Open the full entry →Buying on margin means borrowing money from your broker to buy more stock than your cash alone allows, using your investments as collateral.
🎮 The bank lends for margin buys under Reg T, with a margin call if your own stake falls below 25%.
Open the full entry →1950s–1990s
Risk gets measured, options get a formula, and index funds and ETFs bring the whole market to everyone.
In "Portfolio Selection" (1952), Harry Markowitz measured risk as the spread of returns and showed that combining investments that don't move together lowers risk for the same expected return.
💡 Why it made sense then
Investors already said "don't put all your eggs in one basket"; Markowitz showed how many baskets and which ones.
Ideas it gave us
Diversification is spreading money across many different investments so a loss on one has less effect on the whole portfolio.
🎮 ETFs let you invest in a whole group of people at once.
Open the full entry →A portfolio is the full set of investments a person or fund owns, such as stocks, funds, bonds and cash.
🎮 Your portfolio page shows your holdings, cash, savings, options and net worth.
Open the full entry →Asset allocation is how you divide a portfolio among types of investment, such as stocks, bonds and cash, based on your goals and tolerance for risk.
🎮 Your portfolio in the game mixes shares, ETFs, options, cash in savings and farm plots. How you split them is your asset allocation.
Open the full entry →Standard deviation measures how spread out a set of numbers is around its average. In investing, it's the usual measure of volatility.
🎮 The game measures each person's volatility as the standard deviation of their returns and uses it to price their options.
Open the full entry →Risk tolerance is how much loss or price swing an investor can accept, financially and emotionally, in pursuit of higher returns.
🎮 The house bots each have a different risk tolerance, from SafeBot, which trades rarely and carefully, to YoloBot, which trades often and aggressively. Their results on the leaderboard show how each approach plays out.
Open the full entry →Working at Bell Labs, John Kelly published a formula in 1956 for how much of your money to stake on a favourable bet. Betting more than that raises the risk of ruin.
💡 Why it made sense then
Knowing you have an edge isn't enough; betting too much can still wipe you out.
Ideas it gave us
Position sizing is deciding how much money to put into a single trade, usually based on how much you're willing to lose if it goes wrong.
🎮 The game doesn't stop you putting everything into one person. Your portfolio lists each position's value next to your net worth, so you can see how much rides on each.
Open the full entry →In 1964 William Sharpe (and others around the same time) showed that investors should be paid for risk they can't diversify away, measured by beta, on top of the risk-free rate.
💡 Why it made sense then
It gave investors a benchmark for whether a return was worth its risk.
Ideas it gave us
The capital asset pricing model says an investment's expected return equals the risk-free rate plus its beta times the market's extra return over that rate.
🎮 The game doesn't calculate CAPM, but the idea shows: listings that swing with the whole market should pay more to be worth holding than savings, which pay close to the risk-free rate.
Open the full entry →Beta measures how much a stock tends to move compared with the whole market: a beta of 1 moves with the market, above 1 moves more, below 1 moves less.
🎮 The game doesn't publish a beta, but you can see it at work: some listings rise and fall with the whole market, others move on their own news. ETFs tend to move like the group inside them.
Open the full entry →The risk-free rate is the return on an investment with no default risk, usually taken as the yield on short-term US Treasury bills. Every riskier investment should promise more than it.
🎮 The closest thing to a risk-free rate in the game is savings at the bank: insured up to $25,000 and paying a little under the Federal Reserve's rate.
Open the full entry →Since 1977, The Stock Market Game has let school students manage a virtual portfolio, one of the best-known classroom simulators.
💡 Why it made sense then
Practising with pretend money teaches how markets work without risking savings.
Ideas it gave us
Paper trading is practising trades with pretend money, so you can learn how markets work and test strategies without risking real savings.
🎮 Journey Shares is paper trading with a twist: you trade play-money shares in people, with real-world rules for fees, taxes, margin and options.
Open the full entry →A stock market simulator is a game or tool that lets you buy and sell with virtual money under market-like rules, to learn investing without financial risk.
🎮 Journey Shares is a free stock market simulator where the "stocks" are public figures and prices move only with player trading.
Open the full entry →In 1994 J.P. Morgan made its RiskMetrics method public, letting firms estimate how much they could lose on a bad day.
💡 Why it made sense then
Firms with huge trading books needed one number for their risk.
Ideas it gave us
Risk management in trading is limiting how much you can lose, through position sizing, stop-losses, diversification and avoiding too much leverage.
🎮 The game gives you the same tools real traders use: stop-loss price-point orders, ETFs for diversification, savings that earn interest, and limits on margin.
Open the full entry →2000–today
Trading moves online, costs fall to zero, and crises bring bailouts, quantitative easing and new rules.
Online brokers and the internet boom drew millions into trading, and many bought and sold within the same day. The Nasdaq peaked on 10 March 2000, then lost about three quarters of its value by late 2002.
In 2001 US regulators set the pattern day trader rule, requiring $25,000 in accounts that day trade often.
💡 Why it made sense then
Excitement about a real new technology ran far ahead of what the companies would earn.
Ideas it gave us
A market bubble is when prices rise far above any reasonable measure of value because buyers expect to sell to someone else at a higher price, until confidence breaks and prices crash.
🎮 Listings can bubble: a rush of buying after news pushes a price far above where it settles once the excitement fades.
Open the full entry →The market cycle is the repeating pattern of expansion, peak, contraction and recovery in prices and in the wider economy.
🎮 Listings go through their own cycles: a rush of buying when someone is in the news, a peak, a slide as holders sell, and sometimes a recovery.
Open the full entry →Day trading is buying and selling within the same day to profit from short price moves, closing every position before the market closes.
🎮 You can buy and sell as often as you like, but short-term gains are taxed at 22% versus 15% after a week, and quick round trips lose the spread and slippage.
Open the full entry →Banks had borrowed heavily against mortgage investments. When US house prices fell, losses spread, and Lehman Brothers failed on 15 September 2008.
In October, Congress approved the $700 billion TARP rescue, and in November the Fed began buying huge amounts of bonds. The rescues stopped the panic but raised worries about rewarding risk-taking.
💡 Why it made sense then
Letting big banks collapse risked freezing credit for everyone, so governments chose to rescue them.
Ideas it gave us
A bailout is when a government or central bank gives money to a failing company or bank to keep it from collapsing, usually because its failure would hurt the wider economy.
🎮 If losses wipe out the game bank's capital it fails, calls in its loans and is bailed out at the start of the next weekly season, paid first from tax revenue.
Open the full entry →Moral hazard is the tendency to take more risk when someone else bears the cost if things go wrong, such as a bank expecting a bailout or a driver who is fully insured.
🎮 The game's bank is bailed out when it fails, which shows the moral hazard: every rescue adds new money and leaves the same rules in place.
Open the full entry →Leverage is using borrowed money to increase the size of an investment, which magnifies both gains and losses.
🎮 Borrowing on margin at the bank is leverage: with half borrowed, a 10% move in your shares is about a 20% move in your own money, up or down.
Open the full entry →Quantitative easing is when a central bank creates money to buy large amounts of bonds, pushing long-term interest rates down to support the economy when short-term rates are already near zero.
🎮 The city's 🖨️ money printer event is a joke about it; the real effect in the game comes from bailouts, which create new money when the treasury runs dry.
Open the full entry →In January 2021, traders on social media piled into GameStop, a stock many hedge funds had sold short. As the price soared, short sellers had to buy back at a loss, pushing it higher still.
💡 Why it made sense then
When more shares are sold short than can easily be bought back, a burst of buying can trap the sellers.
Ideas it gave us
A short squeeze is a sharp price rise that forces short sellers to buy shares back to limit their losses, which pushes the price even higher.
🎮 A squeeze can happen in the game: if a person many players have shorted starts rising, short sellers buying back push the curve up further.
Open the full entry →Short selling is borrowing shares, selling them, and buying them back later, to profit if the price falls.
🎮 Short any person through the bank once your account is big enough, with 150% collateral like real brokers require.
Open the full entry →🎮 Practise with $10,000 in play money
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
For learning only. This isn't financial advice.
