As market research goes, the student traders from Polytechnic University of Catalonia in Spain (UPC) are about as thorough as anyone you’ll find. They became interested in futures markets while crisscrossing the globe visiting strategic physical commodity trading routes from Panama to Norway. Before ever executing a trade, they read between 20-40 books about market fundamentals and technical analysis.
The preparation paid off last week when the group – team name UPC Ocean Futures – won the 11th annual CME Group Trading Challenge, beating out 389 other teams from 31 countries.
On February 23, 390 teams were whittled to 39 for the championship round of trading, which lasted two weeks and concluded March 7. Ramón Pina, Helena Lagarda and Rodrigo Brugué ended the competition with a balance of $404,652, more than $30,000 more than the next closest competitor. Each team began the championship round with a simulated balance of $250,000, and all teams traded electronically on a platform provided by CQG throughout the competition.
UPC is a Barcelona-based school known mostly for its focus on maritime engineering, including ship-engineering, navigation, computer programming, telecommunications and biotechnology. As team member Brugué says, “Our thing is the sea and the ocean.”
So how did these first-time traders manage to navigate their way through the ups and downs of futures markets so well over four weeks? We spoke by phone with Brugué to get their perspective. This is an edited version of our conversation.
How did you become involved in the trading challenge?
We had an interest in commodities. We have an interest in the maritime economics and the transport of commodities. We were looking at the physical side of trading. But when you are looking at that, you start looking at financial markets and futures and derivatives. Through this interest and looking at news terminals, we found the web site about the trading challenge. We thought it would be a great opportunity to get some hands on experience and see if we were any good at it.
Did you have a strategy coming into the competition?
We had recently been in Norway learning about the petro-maritime cluster. So we knew what was going on with arbitrage between Brent and WTI, and what had happened to resolve the glut at Cushing, Oklahoma. We grasped what was going on with oil, and knew oil had a lot of volatility so we decided to focus on the crude oil market. But we were also looking at corn and soybeans and gold. We combined fundamentals with technical analysis. We would read Dow Jones, CME Group reports and other sources. But we would also use technical analysis.
We put all that together, and we’d look at the market in different timeframes. We’d look for a trend over time, and when the trend was in tune, then we would get our views on the market.
There were moments when the oil market was going sideways, and we couldn’t define a trend. So we started looking at corn. And that worked out quite well too.
Had your team traded futures before the competition?
No. We had a personal interest in investments. So we started researching exchanges, like the cereal exchanges in Barcelona. We talked to traders to see what they do.
When I was in Panama, I met a former commodity trader who showed us how he would do research. We had also traveled around and seen strategic roads involved in the infrastructure of commodity trading. I believe futures and physical trading are well interlinked.
Teams from 31 countries participated in the 2014 Trading Challenge.
How did travelling the world and seeing the oil business and commodity trading routes help you understand commodity markets better?
The thing about the world trade, it gives you a better idea of what’s going on with trading. There are technical indicators, but there are also fundamentals which influence the market big time.
Are you planning to become a professional trader?
I’m definitely interested. I’ve been looking at different companies like Archer Daniels Midland, CME Group, Platts, McGraw-Hill, Glencore, Bunge, Trafigura. I’m interested in physical trading and the links it has with futures. For example, the arbitrage opportunities that can arise when there is a contango market. When the market is in contango, you have an arbitrage opportunity to buy now, store it, or buy now, transport it and deliver it at the exchange later on. That’s something I’m interested in.
You won the competition by over $30,000 over the next closest competitor. How were you able to build that much separation from your competitors?
We got a good start. We were bullish on the oil market, and on the first day it turned out right. Then when there was an escalation in the conflict in Ukraine, that was an opportunity too. Then there was also the mindset we had. Every time things would go wrong, we would stop our losses and move on to do another successful trade. We would try to let winners run, and when things didn’t go our way don’t think about it. Move on. So I think the mindset helped.
We were also following behavioral economics, monitoring Twitter to see what others in the market were thinking. What was the feeling in the market? Was it bullish, or bearish? Was there a bubble?
What would you say to others who may want to get involved in the competition in the future?
I think it’s important to do a lot of research. Before the competition, we had read 20-40 books about commodities and commodity trading and shipping. Then we read publications like TradeWinds and Futures Magazine. And we tried to look at what other teams had done in past years. When someone is doing something good, you look at it and try to model it.
The Trading Challenge is a great opportunity to get some hands on experience cause it’s not that easy to get the software and test-drive it, and use it.