Okay, so I'm in a sort of competition in an econ class stock market simulation game, and I came to the logic that if there are huge gains for a company, they must eventually fall back to earth, usually in the next day or two. Is this a good strategy in the game? Is there something I am overlooking or something I can do to mitigate risks? So far doing this, I have built a pretty big lead with like 28% gains in a couple days (rather than betting on penny stocks) ... I use something like this: http://bigcharts.marketwatch.com/markets/screener.asp and pick ones which cost around $8-$40 and pretty big gains. I check out some of the news surrounding it and sell it early when the market opens the next day.
Sounds like a plan. You are banking on the mean-reversion vs auto-correlation in stock prices. I recommend: Risk Control and Attribution Analysis 1) Try to size evenly across your bets using: http://oak.ucc.nau.edu/del/stockcalcs/sizer.aspx . 2) Don't double down a loosing position 3) use take profit and stop loss orders 4) Determine your probable gain/loss in every trade. And, review each trade's performance/accuracy in a post-trade analysis 5) Be aware that your stock follows the sector (this might be a good secondary signal) and the general market. As you gain mastery of your method, you may know when it has become optimal to size your bets bigger.
Most games without real money have the property that the top couple players win something, but otherwise it doesn't matter if you lose or by how much. In games like this, it pays to swing for the fences. If they'll let you short KBIO, that might be a good, high volatility bet. Then again, you are already up some so depending on how likely you are to win given your current performance, you might want something more conservative to preserve your lead.
KBIO was about $31-34 when I recommended it; I guess we see where it opens after the halt and SEC charges vs the CEO. You're welcome