Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

UrmaBlume

Game Theory and Predictive Reasoning

Recommended Posts

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

Share this post


Link to post
Share on other sites

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?

Share this post


Link to post
Share on other sites
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

Share this post


Link to post
Share on other sites
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...

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

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?

Share this post


Link to post
Share on other sites

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...

Share this post


Link to post
Share on other sites
You mention commercial traders/speculators a lot, but what exactly is a commercial trader?

 

I presume that it is the following

 

"Commercial and Non-commercial Traders. When an individual reportable trader is identified to the Commission, the trader is classified either as "commercial" or "non-commercial." All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts in that particular commodity for hedging as defined in CFTC Regulation 1.3(z), 17 CFR 1.3(z)"

 

From the Commodity Futures Trading Commission (CFTC) website.

Share this post


Link to post
Share on other sites
I presume that it is the following

"Commercial and Non-commercial Traders. When an individual reportable trader is identified to the Commission, the trader is classified either as "commercial" or "non-commercial." All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts in that particular commodity for hedging as defined in CFTC Regulation 1.3(z), 17 CFR 1.3(z)"From the Commodity Futures Trading Commission (CFTC) website.

 

BlowFish,

 

The CFTC criteria have nothing to do with the way we classify commercial trade.

 

We don't designate trade as commercial by who is doing the trading but rather by certain characteristics of the trade.

 

Most of our work is about the timely designation of local points of price inflection which we call Trade Points. We call our little group TradePointTechnologies.com

 

There are certain measureable dynamics present at most of these local turning points. One that I have demonstrated here is our measure of the Intensity of Trade which is one of 4 primary measures that we use to designate a certain price as a TradePoint.

 

The concepts and indicators I have shown here are not our final layer of processing but merely the inputs to that final layer/level of processing/technology.

 

cheers

 

UrmaBlume

Share this post


Link to post
Share on other sites

So you're basically call those guys commercials traders that are responsible for these local points of price infliction or what you call Trade Points. Or one could say you call those commercial traders that cause local highs or lows?

Share this post


Link to post
Share on other sites

Ahh OK personally I try and use terms that have been adopted in emerging works on market microstructure, Harris in particular (I have not read O'Hara). He deals with who trades how and why. Different types of trader have quite different modus operandi, though of course they all leave 'footprints' across the tape. Might interest you actually if you have not read it already.

Share this post


Link to post
Share on other sites
Ahh OK personally I try and use terms that have been adopted in emerging works on market microstructure, Harris in particular (I have not read O'Hara). He deals with who trades how and why. Different types of trader have quite different modus operandi, though of course they all leave 'footprints' across the tape. Might interest you actually if you have not read it already.

 

I have Harris and even my students find him a bit pedestrian. Lots of pages to describe "informed speculator," "bluffer," or "dealer" with nothing much we could find as useful from the standpoint of practical application at a level anywhere near what we find effective.

 

I don't mean to talk down to either you or the book but I come from 30 yrs on trading floors, in dealing rooms and among market makers and Harris comes off to me and those I teach as a bit ABC in a whole lot of pages.

 

My next book is "Practical Short Term Trading - Techniques & Technologies" and I hope to do a better job of covering the material and provide more practical, accessible and useable information.

 

cheers

Share this post


Link to post
Share on other sites
I have Harris and even my students find him a bit pedestrian. Lots of pages to describe "informed speculator," "bluffer," or "dealer" with nothing much we could find as useful from the standpoint of practical application at a level anywhere near what we find effective.

 

I agree, I had the same criticism when I read his book.

Share this post


Link to post
Share on other sites

My next book is "Practical Short Term Trading - Techniques & Technologies" and I hope to do a better job of covering the material and provide more practical, accessible and useable information.

 

Pad, when do you plan to publish this book and is it possible to preorder it? I'd even offer you to proof-read it ;-).

Share this post


Link to post
Share on other sites
Pad, when do you plan to publish this book and is it possible to preorder it? I'd even offer you to proof-read it ;-).

 

Thanks. While my publisher is always after more cash flow, our primary focus is to grow our little company.

 

Books help to train and to clarify thoughts but no matter how many you sell its not much money when compared to the revenue from 2 more traders or 2 more bots.

 

Thanks for the kind words.

 

cheers

 

Pat

Share this post


Link to post
Share on other sites

It is rather 'text book' and text books tend to be dry...you might go as far as saying hard work. I agree is not really that 'practical' a book (well it might be if you are a regulator or design exchanges). I guess if your sole interest is practical applications and strategies it won't hold much for you.

 

I found certain sections (quite a few) pretty interesting I just re-read about liquidity and bilateral search issues again no real practical use to me but who knows one day maybe one day maybe finding liquidity will be an issue :D interesting none the less. I guess people see things like 'The Glosten-Harris spread estimation model' and their eyes glaze over. I though hmmm maths...Im not very good at that maybe I'll learn something here.

 

I do think his definitions are far more useful than 'smart money' 'big boys' etc. I wonder exactly what you do mean by commercial? Size? Without a common lexicon communication becomes hit and miss at best.

 

I'd be up for proof reading too ;-)

Share this post


Link to post
Share on other sites
Books help to train and to clarify thoughts but no matter how many you sell its not much money when compared to the revenue from 2 more traders or 2 more bots.

 

This is true, but unfortunately you have not answered my question with regards when you intend to publish it and if I can preorder it? I am probably one of the few who could translate your information into something practical for myself since I develop my own software...while others will probably read your book and wish their favorite trading platform vendors would implement your information in the future which is obviously unlikely.

Share this post


Link to post
Share on other sites

So, I've seen Harris and O'Hara books mentioned but not in the form of a recommendation. What's the best book for studying market microstructure?

 

I'm also looking for a recommendation for a solid book on game theory. I don't know/care about poker, so would rather have one that's just focused on game theory, but if the best one is about poker, I'm ok with that. I'm not afraid of math, so heavy in math/theory is fine--just looking for the most informative/useful. I've read some about game theory before, but I would like to read through a good solid formal approach.

 

Oh, and I should say: book that I can get right now :) I also look forward to a certain unpublished book mentioned on this thread, but I'd like to pick one up right away. (Unless that someone needs any help reviewing/editing/proofreading/etc. for which I would gladly volunteer)

 

Thanks!

Share this post


Link to post
Share on other sites
So, I've seen Harris and O'Hara books mentioned but not in the form of a recommendation. What's the best book for studying market microstructure?

 

I'm also looking for a recommendation for a solid book on game theory. I don't know/care about poker, so would rather have one that's just focused on game theory, but if the best one is about poker, I'm ok with that. I'm not afraid of math, so heavy in math/theory is fine--just looking for the most informative/useful. I've read some about game theory before, but I would like to read through a good solid formal approach.

 

Oh, and I should say: book that I can get right now :) I also look forward to a certain unpublished book mentioned on this thread, but I'd like to pick one up right away. (Unless that someone needs any help reviewing/editing/proofreading/etc. for which I would gladly volunteer)

 

Thanks!

 

Thank you for the kind words.

 

I haven't read O'Hara but I found Harris to be very pedestrain, usless for the kind of trading we do and that it said very little that is of practical use in over 600 pages.

 

As to Game Theory I would recommend "An Introduction to Game Theory" by Osborne and "Game Theory" by Meyerson.

 

In addition here are a couple of links I found useful:

 

A collection of articles:

Combinatorial Game Theory

 

Some course notes:

Lectures

 

Enjoy

 

cheers

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 11th July 2025.   Demand For Gold Rises As Trump Announces Tariffs!   Gold prices rose significantly throughout the week as investors took advantage of the 2.50% lower entry level. Investors also return to the safe-haven asset as the US trade policy continues to escalate. As a result, investors are taking a more dovish tone. The ‘risk-off’ appetite is also something which can be seen within the stock market. The NASDAQ on Thursday took a 0.90% dive within only 30 minutes.   Trade Tensions Escalate President Trump has been teasing with new tariffs throughout the week. However, the tariffs were confirmed on Thursday. A 35% tariff on Canadian imports starting August 1st, along with 50% tariffs on copper and goods from Brazil. Some experts are advising that Brazil has been specifically targeted due to its association with the BRICS.   However, the President has not directly associated the tariffs with BRICS yet. According to President Trump, Brazil is targeting US technology companies and carrying out a ‘witch hunt’against former Brazilian President Jair Bolsonaro, a close ally who is currently facing prosecution for allegedly attempting to overturn the 2022 Brazilian election.   Although Brazil is one of the largest and fastest-growing economies in the Americas, it is not the main concern for investors. Investors are more concerned about Tariffs on Canada. The White House said it will impose a 35% tariff on Canadian imports, effective August 1st, raised from the earlier 25% rate. This covers most goods, with exceptions under USMCA and exemptions for Canadian companies producing within the US.   It is also vital for investors to note that Canada is among the US;’s top 3 trading partners. The increase was justified by Trump citing issues like the trade deficit, Canada’s handling of fentanyl trafficking, and perceived unfair trade practices.   The President is also threatening new measures against the EU. These moves caused US and European stock futures to fall nearly 1%, while the Dollar rose and commodity prices saw small gains. However, the main benefactor was Silver and Gold, which are the two best-performing metals of the day.   How Will The Fed Impact Gold? The FOMC indicated that the number of members warming up to the idea of interest rate cuts is increasing. If the Fed takes a dovish tone, the price of Gold may further rise. In the meantime, the President pushing for a 3% rate cut sparked talk of a more dovish Fed nominee next year and raised worries about future inflation.   Meanwhile, jobless claims dropped for the fourth straight week, coming in better than expected and supporting the view that the labour market remains strong after last week’s solid payroll report. Markets still expect two rate cuts this year, but rate futures show most investors see no change at the next Fed meeting. Gold is expected to finish the week mostly flat.       Gold 15-Minute Chart     If the price of Gold increases above $3,337.50, buy signals are likely to materialise again. However, the price is currently retracing, meaning traders are likely to wait for regained momentum before entering further buy trades. According to HSBC, they expect an average price of $3,215 in 2025 (up from $3,015) and $3,125 in 2026, with projections showing a volatile range between $3,100 and $3,600   Key Takeaway Points: Gold Rises on Safe-Haven Demand. Gold gained as investors reacted to rising trade tensions and market volatility. Canada Tariffs Spark Concern. A 35% tariff on Canadian imports drew attention due to Canada’s key trade role. Fed Dovish Shift Supports Gold. Growing expectations of rate cuts and Trump’s push for a 3% cut boosted the gold outlook. Gold Eyes Breakout Above $3,337.5. Price is consolidating; a move above $3,337.50 could trigger new buy signals. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Back in the early 2000s, Netflix mailed DVDs to subscribers.   It wasn’t sexy—but it was smart. No late fees. No driving to Blockbuster.   People subscribed because they were lazy. Investors bought the stock because they realized everyone else is lazy too.   Those who saw the future in that red envelope? They could’ve caught a 10,000%+ move.   Another story…   Back in the mid-2000s, Amazon launched Prime.   It wasn’t flashy—but it was fast.   Free two-day shipping. No minimums. No hassle.   People subscribed because they were impatient. Investors bought the stock because they realized everyone hates waiting.   Those who saw the future in that speedy little yellow button? They could’ve caught another 10,000%+ move.   Finally…   Back in 2011, Bitcoin was trading under $10.   It wasn’t regulated—but it worked.   No bank. No middleman. Just wallet to wallet.   People used it to send money. Investors bought it because they saw the potential.   Those who saw something glimmering in that strange orange coin? They could’ve caught a 100,000%+ move.   The people who made those calls weren’t fortune tellers. They just noticed something simple before others did.   A better way. A quiet shift. A small edge. An asymmetric bet.   The red envelope fixed late fees. The yellow button fixed waiting. The orange coin gave billions a choice.   Of course, these types of gains are rare. And they happen only once in a blue moon. That’s exactly why it’s important to notice when the conditions start to look familiar.   Not after the move. Not once it's on CNBC. But in the quiet build-up— before the surface breaks.   Enter the Blue Button Please read more here: https://altucherconfidential.com/posts/netflix-amazon-bitcoin-blue  Profits from free accurate cryptos signals: https://www.predictmag.com/ 
    • What These Attacks Look Like There are several ways you could get hacked. And the threats compound by the day.   Here’s a quick rundown:   Phishing: Fake emails from your “bank.” Click the link, give your password—game over.   Ransomware: Malware that locks your files and demands crypto. Pay up, or it’s gone.   DDoS: Overwhelm a website with traffic until it crashes. Like 10,000 bots blocking the door. Often used by nations.   Man-in-the-Middle: Hackers intercept your messages on public WiFi and read or change them.   Social Engineering: Hackers pose as IT or drop infected USB drives labeled “Payroll.”   You don’t need to be “important” to be a target.   You just need to be online.   What You Can Do (Without Buying a Bunker) You don’t have to be tech-savvy.   You just need to stop being low-hanging fruit.   Here’s how:   Use a YubiKey (physical passkey device) or Authenticator app – Ditch text message 2FA. SIM swaps are real. Hackers often have people on the inside at telecom companies.   Use a password manager (with Yubikey) – One unique password per account. Stop using your dog’s name.   Update your devices – Those annoying updates patch real security holes. Use them.   Back up your files – If ransomware hits, you don’t want your important documents held hostage.   Avoid public WiFi for sensitive stuff – Or use a VPN.   Think before you click – Emails that feel “urgent” are often fake. Go to the websites manually for confirmation.   Consider Starlink in case the internet goes down – I think it’s time for me to make the leap. Don’t Panic. Prepare. (Then Invest.)   I spent an hour in that basement bar reading about cyberattacks—and watching real-world systems fall apart like dominos.   The internet going down used to be an inconvenience. Now, it’s a warning.   Cyberwar isn’t coming. It’s here.   And the next time your internet goes out, it might not just be your router.   Don’t panic. Prepare.   And maybe keep a backup plan in your back pocket. Like a local basement bar with good bourbon—and working WiFi.   As usual, we’re on the lookout for more opportunities in cybersecurity. Stay tuned.   Author: Chris Campbell (AltucherConfidential) Profits from free accurate cryptos signals: https://www.predictmag.com/   
    • DUMBSHELL:  re the automation of corruption ---  200,000 "Science Papers" in academic journal database PubMed may have been AI-generated with errors, hallucinations and false sourcing 
    • Does any crypto exchanges get banned in your country? How's about other as Bybit, Kraken, MEXC, OKX?
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.