Algorithms and Trading Systems based on Chess game strategies - page 3

[Rogerio Figurelli]

laplacianlab:

Quiet move

A quiet move is any move that doesn't result in a piece being threatened or captured.

http://www.chessgames.com/perl/chesscollection?cid=1006153

When traders are able to wait patiently for their goals, they are like positional chess players who seem to be losing their turn when, in fact, they're improving their position on the board.

laplacianlab, great, now you get it, as simple as that (let's evolve this to create something more sophisticated like peaces models, as you proposed and I see as a very good evolution to this approach). 

A quiet move is also a strategic move, since you are planning an decision tree. 

As stated by angevoyageur at each time, there are only 2 possibilities for the market to move up or down (for sure there is a third one, that is a lateral move, but this is not relevant now).

But for the player (trader) there are several complex decisions, like choosing stoploss/takeprofit, lot size, buy/sell/wait, time, etc., and this for me is infinity options, since today we have several complex quantitative models.

And quiet move, like in chess, is a very strategic movement based on future projections.

[Rogerio Figurelli]

An algorithm example for Block Tactic and/or Quiet Move Tactic

The idea here is to avoid trade if we have some economic news and/or headlines with some strategic word, for instance "Index,Rate,Confidence,Bond,Oil".

If we detect some of these words in news we can go to a block or quiet chess move, as explained in other posts. 

// Block Tactic and/or Quiet Move Example

input string risk_news_words="Index,Rate,Confidence,Bond,Oil"; // Risk News Words

string result[];
int k=StringSplit(risk_news_words,',',result);
if (k>0) {
   for (int j=0; j<k; j++) {
      if (StringFind(news_headline,result[j],0)>=0) {
         ...  
         ... // Block Tactic and/or Quiet Move Algorithm
         ...
      }
   }
}

Note that we can do the reverse strategy, that is just trade in the case of some of these words are present in the news.

We are far way of a Checkmate algorithm, but I think this is a good connection from Chess tactics to study.

[[Deleted]]

Gambit

Giving material to your opponent is called a gambit. The goal is gaining time, space or whatever, something you consider is best than the piece you give.

Gambits are complex decisions that take place when evaluating the opportunity costs of choices. Click here to know what an opportunity cost is.

Figure showing a King's Gambit

[[Deleted]]

I think that gambits are a bit different from The Sacrifice Tactic. As far as I know, gambits are usually something like development or positional moves, for instance, the King's Gambit goal is winning space and control the center. However, "sacrifices" are more tactic. I mean, gambits are strategic and sacrifices are tactic. But I am an amateur, sorry, and maybe they're very similar or they are the same.

[Rogerio Figurelli]

laplacianlab:

I think that gambits are a bit different from The Sacrifice Tactic. As far as I know, gambits are usually something like development or positional moves, for instance, the King's Gambit goal is winning space and control the center. However, "sacrifices" are more tactic. I mean, gambits are strategic and sacrifices are tactic. But I am an amateur, sorry, and maybe they're very similar or they are the same.

Great, please go ahead, the most relevant is if you can you see some different conversion to a trading system algorithm. 

[[Deleted]]

figurelli:

Great, please go ahead, the most relevant is if you can you see some different conversion to a trading system algorithm. 

That is much more difficult! We should analyze it well and think hard. In any case, I personally think that chess and trading have a lot in common because they are strategic games.

[Rogerio Figurelli]

Tactics and Strategies about Exchanging Pieces

If you play chess you will have to face this dilemma: pieces exchanging.

Maybe here, is a good point to connect the pieces with market actors, like Laplacianlab ideas.

For instance, a good money management must decide your value at risk (VaR). We can consider the VaR as a piece, that we need to exchange, like expose more or less, if market conditions are better or worst.

Also, a chess algorithm must attribute a value for each piece for this decision. Don't we have to do the same in a trading system?

[q.import]

figurelli:

Tactics and Strategies about Exchanging Pieces

If you play chess you will have to face this dilemma: pieces exchanging.

Maybe here, is a good point to connect the pieces with market actors, like Laplacianlab ideas.

For instance, a good money management must decide your value at risk (VaR). We can consider the VaR as a piece, that we need to exchange, like expose more or less, if market conditions are better or worst.

Also, a chess algorithm must attribute a value for each piece for this decision. Don't we have to do the same in a trading system?

I like your idea its very nice, I wait for the market to set off a signal, then determine whether it need to be Instant Market Execution, Pending , or Delay the entry . Once the order has been filled TP, SL,and Hedging come into play.

On multiple charts we many other signals that go off, using that information the game begins pushing numbers back and forth do I exit , take more profit, take a loss, hedge the position, reduce or increase lot size. Keeping track of all the methods used can allow your EA to make informed order management.

Its multidimensional problem that is solvable. In the end your not constantly in the market. Let the market come to you.  So far the only difference I see from chess and the market place is that playing chess doesn't pay the bills.

[[Deleted]]

figurelli:

Tactics and Strategies about Exchanging Pieces

Also, a chess algorithm must attribute a value for each piece for this decision. Don't we have to do the same in a trading system?

At this point we could try to define the new pieces as if they were Abstract Data Types ADT. The VaR piece looks ok!

However, I think it is very important to clearly set "the what" of the problem. I mean, what are we solving?

For instance:

1. How is this chess-inspired game like?

2. Do we agree that this new game is for traders to play against one specific chart (Gold, EURUSD, etc.)? White/Black = trader, White/Black = 1 chart

[Rogerio Figurelli]

q.import:

I like your idea its very nice, I wait for the market to set off a signal, then determine whether it need to be Instant Market Execution, Pending , or Delay the entry . Once the order has been filled TP, SL,and Hedging come into play.

On multiple charts we many other signals that go off, using that information the game begins pushing numbers back and forth do I exit , take more profit, take a loss, hedge the position, reduce or increase lot size. Keeping track of all the methods used can allow your EA to make informed order management.

Its multidimensional problem that is solvable. In the end your not constantly in the market. Let the market come to you.  So far the only difference I see from chess and the market place is that playing chess doesn't pay the bills.

Q.import, thanks, good points too, 100% agree with most of them, this is a multidimensional strategic vision that is very strong in chess, try to imagine the opponent (market?) future movements.

If you give a brand new middle game to a Chess Grandmaster he can see very clear, in few seconds, several strategies that are rolling on.

More than this, if you give an aleatory new middle game to him, probably he will discover that something is wrong.

This is the same by giving a new market scenario to an expert trader, in few seconds he can build a big picture. 

Actually, the big value of this, at least at this topic, is if we can find some new connection that just is used in chess, but not yet in trading systems, and we can see algorithms to achieve this. So, in this sense, if you give an aleatory market scenario to a trader, will the expert discover that something is wrong?