Game Theory Trades

Gametheorytrades.com is a Web-based utility that allows the creation of stock trading systems which can incorporate mathematical game theory-based trading models.

The gaming theory trading strategy that we have constructed is a model that recommends profitable Trade Groupings by spreading the chances for profitability across individual trades and then incorporates a ratcheting limit sell price on the upside. We have a number of Packages and pre-defined Trading Systems that illustrate this concept. Package recommendations are made daily ran in a batch overnight. Daily Package recommendations are ran in batches overnight that are available each morning prior to market opening. Intraday data or recommendations are not available. Users who register can build and test their own Packages.

Recent Pre-Defined Package Predictions

Gametheorytrades.com has built number of pre-defined Packages which generate daily recommendations that can be viewed, analyzed and compared.

Historical Game Theory Strategies

Our gaming theory trading strategy is similar to the popular Martingale Strategy invented by French mathematician Paul Pierre Levy, used to increase your chances of winning when playing Roulette. In the Martingale Strategy, a player places a bet on either red or black. If they win great!, round one has completed with a profit. If they lose, then they bet twice as much on the same color. If they win they have made up for their prior loss and have a profit. If they lose, the doubling down continues.

The key is they are increasing their probability of a win by looking at multiple bets as one unit. A single bet in Roulette has basically a 50% chance of a red being selected. (Yes, we know there are also green squares). When you look at two sequential bets, there is a 75% that red will have appeared at least once. After three bets, there is an 87.5% chance red will have appeared at least once. And after four bets, there is a 93.75% chance that red will have appeared at least once. Looking at the probabilities of groups of bets, and changing the $ amount bet on subsequent rounds, will increase your odds of winning to any arbitrarily chosen value.

There are obvious problems with applying the pure Martingale Strategy to stock trading! It cannot work for the following reasons:

• Brokerage fees & Taxes
• Cost per trade (buy/sell) fees
• Limits on trades volumes imposed by brokers
• Significant $ amount invested for little $ return
  

However the Stock Market is different than Roulette. Every round in Roulette is completely independent of all previous rounds. The wheel does not care which color came up last.

While the Stock Market is volatile, it is not random. It has inertia and it is directed by humans with biases, beliefs and emotions. This is why Technical Analysis and trading strategies based on technical indicators are successful. Also, we prefer to analyze and incorporate Stock Indexes into our packages. While a particular stock may perform poorly and plummet to $zero, an Index never does. Indexes remove a lot of the risk of using this type of trading strategy.

Analyzing the history of a Stock and intelligently determining the correct thresholds to trigger a “Sell” or another “Buy” can produce a profitable trading Package. Averaging down your cost per share makes it much easier for the market to reach that number. Also, selecting the right points to increase your limit sell when the stock price has risen above your break-even point allows for unlimited upside.

This site provides the tools to perform the analysis create the trading strategy and apply it to a real Stock and get predictions on a daily basis.

Like all quantitative, or rules based, trading systems that utilize Technical Indicators, this system is unaware of the Current News, Political Events or anything happening in the world that could positively or negatively affect the price of a Stock. Only daily Open, High, Low, Close and Volume are considered.

How does this site work?

This site is built around the concept of grouping a “Stock” with a “Trading System” which we called a trading “Package”. Packages allow historical simulations to be ran and generate statistics which allow them to be quantitatively compared. Specifically a package is composed of:

• The Stock Symbol – We monitor and import dozens of publicly traded Stocks and Indexes. Each package has a single Stock or Index that it is focused on.
• The Trading Systems – A Trading System is a combination of three “Triggers”. Triggers are mathematical rules applied to common Technical Indicators that are ran on a Stocks historical data.
  
  • Buy Trigger – Criteria for when to enter into a trade
  • Move Trigger – Criteria for exiting a trade profitably, or further investing in a Stock
  • Panic Trigger – Criteria for exiting a trade to preserve capital
    

When a Package is created, analysis is performed to show how the package would have performed for the history of the symbol it is associated with, starting at any arbitrary point in the past. Any Trading Systems can be applied to any Stock. One Trading System can be applied to multiple Stocks and vice versa, each in its own Package.

Once a package is created, nightly recommendations are produced by the package. Register now and try it out for yourself.