Making the Classroom Desk a Trading Desk

Even though the economy is only slightly less important than the air we breathe, it’s hard to get today’s youth engaged in learning economics. The abstract language and theories are off-putting, and don’t seem relevant to their daily lives. One way I’ve found to motivate students to explore our economy, is to involve them in a simulation game that makes them traders in the financial markets. The simulation is simple to set up, and it doesn’t take much teacher time. I let it run in the background of my class for most of the term.

Introduction to the Stock Market

Getting started involves some introductory teaching. I briefly go over the basics that pupils will need to understand in order to trade. I don’t go over these topics in-depth, because I’ll be returning to them often throughout the simulation. To begin with, they need to have some understanding of the following ideas:

• The nature and importance of the markets.
• The definition of a stock, a bond, and commodities.
• The nature of interest rates and how they affect bond prices.
• How trades are made in the real markets.
• Why there is a ticker, and what a ticker symbol is.
• The nature of market funds, including index funds and ETFs.
• How one’s appetite for risk can affect his trading success.

The Logistics of the Simulation

Setting up and running the simulation is a relatively simple business. Each person keeps track of his activities in a written log. I keep the Wall Street Journal MarketWatch website up on a computer in class so the kids have access to stock prices (they can also get that information at home on the Internet or from a newspaper). I also usually give them a handout with the rules of the simulation, and then go over the rules using real-time examples from MarketWatch. The rules are simple and straightforward.

The Rules of the Simulation

• Pupils begin the simulation with a $1,000,000 virtual trading account.
• They can invest that cash in individual stocks listed in the S&P 500 index, in bond funds, or in commodity ETFs (they must own at least one of each). They must have at least five holdings.
• They’re required to rebalance their portfolios once a week by buying or selling shares. I show them the basics of how to find the ticker symbol of the stock they want to buy, and how to use MarketWatch to track its performance over days, weeks, or months.
• Pupils enter their trades in a notebook, tracking the current share price, number of shares, total value of each holding, and the total value of their portfolio. Once a week, they turn in their notebooks, and I review their progress, checking to see that they’ve made trades and that their accounting is accurate.

Motivated by the Market

The interesting thing about this simulation is that students almost immediately become fascinated with trading. The money involved is virtual, but that doesn’t seem to matter. With few exceptions, they agonize over their trading decisions and compete with each other over who’s making (or losing) the most money. The entertaining part is that they all start out convinced that they will be wildly successful traders, and are then dismayed when they find out how easy it is to lose one’s shirt in the stock market. Almost all of them lose money, and a fair number go broke. I have had a few who have succeeded in making money, but they usually had help from someone who was fairly sophisticated financially (which is ok!).

The great value of this simulation for me as a teacher is that it motivates my pupils. Once the kids have a stake in the game, it becomes much easier to keep them interested in the subject matter. And almost every topic in economics relates in some way to the markets. Because the simulation is ongoing, I always have a hook available, something that will capture their interest. I can bring up the nature of the Federal Reserve, for example, and they’ll pay attention, because I show them how manipulating interest rates affects stock prices. As part of the simulation, I require them to own commodities. This makes the concept of supply and demand suddenly important to them. Unemployment, the current controversy about fracking, the political controversy over the national debt, and all kinds of current events can be related in some way or other to stock prices. I think the simulation would be interesting and motivating for social studies learners, too.

My young economics scholars need motivation, and they need a rich context for the abstract concepts they’re learning. This simple, easy simulation provides both.

Additional Lesson Planet Resources:

Understanding the Stock Market 

This useful presentation explains the concepts and vocabulary of the stock market in a visual format that works well with a classroom projector. The presentation is simple and clear.

How Do You Read Stock Quotes Online? 

Pupils explore how to get and interpret data on stock prices. They find out how to access stock charts and financial information directly from stock exchanges worldwide.

The Stock Market: Risks and Rewards 

An entertaining lesson based on the random walk theory of markets. Pupils throw a dart at a list to choose three stocks, and compare their performance with the recommendations of experts. (The dart usually wins!)