What 10,000 student trades taught us about risk
Marcus Thompson
Data & Insights · May 14, 2025 · 8 min read
One advantage of a paper-trading platform is that nobody gets hurt when a student makes a classic mistake — and they make all of them. After analyzing tens of thousands of simulated trades, a few patterns stood out so clearly that we redesigned parts of the curriculum around them.
1. Everyone starts over-concentrated
Nearly every new student puts most of their virtual capital into one or two "obvious" stocks — usually the most famous tech names. It's the most natural thing in the world, and also the riskiest. The students who eventually outperformed weren't the best stock-pickers; they were the ones who learned to spread out.
Students who held five or more positions had dramatically smaller drawdowns than those holding one or two — without giving up much return. Diversification really is the closest thing to a free lunch.
2. The disposition effect is universal
Given the chance, students sold their winners and clung to their losers — the textbook "disposition effect." The instinct to lock in a gain and avoid admitting a loss is so deeply human that it showed up in sixteen-year-olds with fake money. Naming the bias, and showing students their own data, was the most effective antidote we found.
3. Activity hurt more than it helped
The most active traders — the ones constantly buying and selling — tended to underperform the students who set a portfolio and largely left it alone. It's the same lesson professionals learn the hard way: doing less is often the better strategy.
“The students didn't need to be told these lessons. They needed to live them safely — and then see the data.”