Game Theory for trading

Discussion in 'Strategy Building' started by sridhga, Aug 7, 2023.

  1. sridhga

    sridhga

    Does anybody here use game theory for trading? If so, how can one put it to use?
     
    murray t turtle likes this.
  2. newwurldmn

    newwurldmn

    game theory is more a state of mind than a specific strategy. you would be using some aspect of it all the time to think about the optimal and rational moves of your counterparty or the of your competition.
     
  3. I use video game theory.... have fun, press the buttons and go for new highscores.
     
  4. newwurldmn

    newwurldmn

    and reset the sim account when you die :)
     
  5. Sekiyo

    Sekiyo

    I like the backward induction principle

    Munger said …
    All I want to know is where I’m going to die, so I’ll never go there.

    [Jacobi] knew that it is in the nature of things that many hard problems are best solved when they are addressed backward,
    Munger counsels.

    Inversion and The Power of Avoiding Stupidity

    Found an interesting playlist on YouTube

    Formally speaking it’s useless to me,
    But some interesting concepts to be learned.

    Too many players with different interests, outcomes and probabilities.
     
    Last edited: Aug 7, 2023
    PennySnatch likes this.
  6. The part that is closely related to trading is the Risk Management bit.

    https://arxiv.org/pdf/1711.00708.pdf

    Game theory will work on optimizing a bet based on the bank roll and that can be translated to trading easily.
     
    sridhga likes this.
  7. SunTrader

    SunTrader

    More like over-optimize.
     
    murray t turtle likes this.
  8. Sergio123

    Sergio123

    We are all using game theory. A rally that is trending at a steady pace over time is usually due to cooperation.

    But a poisson jump from a short squeeze is competition.

    Maximizing payoff from cooperation and competition is what game theory is all about.
     
    Sekiyo likes this.
  9. newwurldmn

    newwurldmn

    I was a teaching assistant for a grad level game theory class in college.

    it’s more generally about determining the outcome if everyone behaves optimally. The generalized skill is to think about the other guys’ incentives, information, utility function and understand their likely and rational course of action.
     
    murray t turtle and Sekiyo like this.
  10. I don't have one but happy to read others
     
    #10     Aug 7, 2023