The 2023 edition of Horizons ETFs’ annual Biggest Winner ETF Trading Competition is in full swing – and it’s proving to be the fiercest contest yet.

With over 2,100 registrants competing in a simulated trading environment, the six-week fantasy trading competition has swelled considerably from the 1,700-odd participants it saw last year. And according to Mark Noble, executive vice president, ETF Strategy at Horizons ETFs, it’s easy to see why.

“The broader investment community has expanded so much post-pandemic,” Noble says. “We’ve probably added about 4 million new self-directed investors in Canada over the last four years, which is translating into more activity online in terms of discussions about investing on forums, as well as engagement in our competition.”

A broader trading field

When Horizons first held the competition more than 12 years ago, it initially focused on raising awareness and educating investors about leveraged ETFs – a new offering at the time – which it recommends for single-day time horizons because of their volatility and concentrated exposures. Rather than have investors use them in the actual markets, Noble says it made sense to create a fantasy trading environment where they can become comfortable buying and selling ETFs on a quick basis.

By Noble’s estimates, the Canadian ETF industry then consisted of only 300 ETFs. Today, over 1,053 ETFs from 42 providers exist in Canada, according to the latest figures from the Canadian ETF Association (CETFA). Over the last few years, Horizons has expanded the competition to include all ETFs listed on the TSX, which is a co-sponsor of the competition.

“There's pretty much an ETF for any kind of investment strategy you can think of,” Noble says. “This simulation gives you the chance to really create a comfort level with ETF investing, do whatever you want, with no risk because it's obviously fast and fun.”

Within the notional-dollars-only context of the ETF trading competition, there’s a greater tendency for people to take long shots. Noble says the winners of the competition have tended to be the ones who use leveraged ETFs, as the volatility of their performance lends itself to supersized gains – if you buy them at the right time. But compared to before, participants are less prone to automatically reach for their drivers, and are more likely to consider putters, wedges, and nine-irons as the situation requires.

“It’s been gratifying to see a much wider swath of ETFs being used, which I think underscores the value of this event as an education tool,” Noble says.

A trading lab for advisors

In recognition of the growing profile of finfluencers in the online investing community, Horizons has upgraded the competition with a Featured Traders platform, which highlights a number of finfluencers along with a former winner on a leadership board.

Some names on the featured list aren’t traders to their core, but actually have long-term investment strategies. Those individuals are taking the opportunity to educate their followers on the differences between trading and investing, and how the different philosophies might require different types of ETFs.

Among the thousands of individuals who enter each year, Horizons estimates around 10% are advisors. Far be it for most investment professionals, who preach the gospel of holding on for the long term, to advocate short-term trading, but the Horizons ETFs competition gives many an opportunity to scratch an itch for entertainment, as well as a sandbox for experimentation.

“Advisors are not dissimilar from other investors,” Noble adds. “Sometimes, there’s an investment strategy they’d really like to try – trading with cryptocurrency ETFs, for example, or running a pair trade with crypto and commodities – and they’d prefer not to use their own capital. Definitely not their clients’ either!”

So which categories of ETFs are emerging as the draft picks in this season of the fantasy ETF competition? Within Horizons’ trading battle royale, Noble is seeing a lot of early trades focused on volatility, with many competitors applying a “live by the sword, die by the sword” mentality to bets on crypto and commodities.

“We’ll have to look at the data again in a couple of weeks, but that's the nature of the competition,” he says. “In order to generate the 14% to 20% threshold to get on the leaderboard, you probably have to be in those higher-torque strategies.”