[UrmaBlume]

As both a poker player and a trader - game theory and predictive reasoning plays a big part in what I do.

In the clip bleow a very smart man provides insight into basic game theory and predictive reasoning - insights that, for those that can handle it, provide a glimpse into a new dimension in trade decision support information processing.


http://digg.com/d1o9iD

[jonbig04]

interesting...........

[thrunner]

Mr. de Mesquita suggests that the stock market is unpredictable, in his analysis, while the decision making process in Iran can be predicted to 90% certainty, regarding the building of the bomb.

Why do you think this is the case? Are there just too many players in the market and too little information on what position they hold that makes it insoluble? Does this suggests that one should isolate a sector of the market and try to analyze and influence the players in just one sector of the market? Which is apparently what the investment banks and hedge funds tried to do with the oil market and now with the gold market.

If this is indeed the case, shouldn't one be in sector specific markets rather than the index futures, for example?

[UrmaBlume]

Originally Posted by thrunner »

If this is indeed the case, shouldn't one be in sector specific markets rather than the index futures, for example?

We believe that each instrument is a market unto itself and from there we try and discover the interests and activity of the major participants.

In the case of the stock index instruments we believe that the commercial speculator is the force that drives price and we make efforts to track his trade via such indicators as Trade Intensity, Buy/Sell Volume Harmonic, Net New Commercial Trade and others, most of which have been disscussed in previous posts to this board.

cheers

[zdo]

Originally Posted by thrunner »

Mr. de Mesquita suggests that the stock market is unpredictable, in his analysis, while the decision making process in Iran can be predicted to 90% certainty, regarding the building of the bomb.

Why do you think this is the case? Are there just too many players in the market and too little information on what position they hold that makes it insoluble? Does this suggests that one should isolate a sector of the market and try to analyze and influence the players in just one sector of the market? Which is apparently what the investment banks and hedge funds tried to do with the oil market and now with the gold market.

If this is indeed the case, shouldn't one be in sector specific markets rather than the index futures, for example?

My limited perspective - His is a specialized model of game theory that requires good representations of 1) who has a stake, 2) what they say they want 3) how focused / how big a deal it is to them 4) how much clout they have if decide to act…
For exchange traded markets, in both macro/broad index and micro/sector/ individual instruments, 1) is unknown and is also too transient 2) ‘they’ always say they want the same thing, they “want it to go up” - not differentiable info 3) their focus is immeasurable (and, like 2), malleable and transient) 4) the ‘clout’ is also transient (and also prefers to keep position information secret). That’s essentially why he doesn’t (publicly) apply his model to the stock markets… Also, his model is applied to situations which ‘resolve’ at least in terms of current circumstances and conflicts. Markets never ‘resolve’… so applying other game theory models would be more appropriate and he knows it...

[BlowFish]

Doesn't game theory need a discrete (finite) number of players, moves and outcomes? Aren't continuous games much harder (if possible at all ) to model?

Having said that I have no formal knowledge of game theory though have been an avid gamer for a long time.

[AgeKay]

Originally Posted by UrmaBlume »

In the case of the stock index instruments we believe that the commercial speculator is the force that drives price and we make efforts to track his trade via such indicators as Trade Intensity, Buy/Sell Volume Harmonic, Net New Commercial Trade and others, most of which have been disscussed in previous posts to this board.
cheers

You mention commercial traders/speculators a lot, but what exactly is a commercial trader?

[become]

Thanks for posting that - very interesting in the light of recent developments in Iran. Those TED talks are wonderful - and great listening when the market is moving slowly.

Also (and more generally), I've only just started exploring this site seriously, and came across your various threads over the weekend - thanks for those as well, they contain a lot of very suggestive material.

I've been trading for some time with volume bars, a velocity histogram, and cumulative delta, and have been searching for ways to measure and exploit more precisely what I've been observing. Having the computer beep when large lots are hitting the bid and the ask can alert one to all sorts of interesting activity, but quantifying it is something else. You've indicated some interesting directions...