The market is a controlled dynamic system. - page 345
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Forum on trading, automated trading systems and trading strategy testing
The market is a controlled dynamic system.
Oleg avtomat, 2018.07.20 22:09
Not really. In this case, the second party (seen as a single player or as a coalition) is the external environment, whose opposition is indirectly expressed through control error.
In terms of game theory it is necessary to identify the opposing strategy
du = Au + Bv
dv = Cu + Dv.
It is possible to make such an estimate. But it has to be done, again, through the control error (incoherence).
Have you taken any steps in this direction yet?
For a long time I had this problem in my head, but it didn't really catch on... But now, thanks to Aleksey Nikolayev, I'm interested. I'll get down to it. Let's see what comes of it.
Read game theory carefully. It only works when the opponent's strategy is unchanged (game rules all the more so), and there is often no solution at all for the plurality of players.
There is always a solution - read up to Nash equilibrium. Of course, mixed strategies don't always make sense, but in our case it can be found.
In addition, the TS is about the game with nature (environment) - there, on the contrary, there is a problem with choosing from the abundance of solutions (what exactly the ratio of risk and winnings to optimize). In fact, the optimization of the Expert Advisor is an example of the problem from this area.
Read game theory carefully. It only works when the opponent's strategy is unchanged (the rules of the game even more so), and for multiple players there is often no solution at all.
Forex is a game with a tiger's tail. If you take the market as a game, you are bound to encounter the face of the tiger. No one will seriously play such a high-risk game with the market. You throw that out of your head. The market is governed by economic laws. In a normal market, in order to adequately describe the profit formula, you have to account for 17 real and virtual varieties of price, estimate, using actual data, the maximum virtual volume of the market and a coefficient that takes supply and demand for a given product into account. If one of them is not taken into account, you will never achieve equality of profit according to this formula and the obvious formula as the difference between income and all kinds of fixed and variable costs. In financial markets the task of determining these market parameters is complicated, but, indirectly, they can be estimated and have a positive effect.
I have suggested to Oleg many times that the idea of market management should be abandoned. Management and the market are two mutually exclusive concepts, they are antipodes. If the market can be managed, then it is no longer a market.
There is always a solution - read up to Nash equilibrium. Of course, mixed strategies don't always make sense, but in our case it can be found.
In addition, the TS is about the game with nature (environment) - there, on the contrary, there is a problem with choosing from the abundance of solutions (what exactly the ratio of risk and winnings to optimize). In fact, the optimization of the Expert Advisor is an example of the problem from this area.
Nash equilibrium is only for deterministic games with known outcomes. Everything else is a simple optimization and I don't know how (and why) game theory should be applied there.
Nash equilibrium is only for deterministic games with known outcomes. Everything else is ordinary optimization and how (and why) to involve game theory I do not know.
If the initial idea of any study is defective, optimization will not solve the problem. It is necessary to first formulate a plausible idea, somehow related to the market, then gradually develop it.
If the initial idea of any research is flawed, then optimisation will not solve the problem. It is necessary to first formulate a plausible idea that is somehow related to the market, and then gradually develop it.
And why should anything be formulated, if everything has been formulated by several generations of traders. There's not much else to come up with, except your own new derivatives.
why formulate something when everything was formulated a long time ago by several generations of traders. There's not much else to come up with, except your own new derivatives
Name, the main points of view on the market, which were formulated a long time ago by several generations of traders. By and large they do not exist, which is why traders are in trouble.
Name the most important market views formulated by several generations of traders a long time ago. They are largely absent, which is why traders are in trouble.
In game theory, as far as I remember, the economy is seen as an auction with all that it implies. There are no other models there. Arbitrage (statistical) as a temporary inefficiency and a path to market efficiency is the most common strategy formulated.
Nash equilibrium is only for deterministic games with known outcomes. Everything else is ordinary optimization and how (and why) to involve game theory, I do not know.
I do not really understand your terminology. For example, a stochastic game(Nash equilibrium is there) is deterministic for you or not? If all moves in a game are non-deterministic (completely random), then that game naturally does not belong in the realm of game theory. But in the marketplace, it seems to me, not all moves are random.
Again, even in the case of nature games there is no "just optimisation" - a change in the optimisation criterion can dramatically change the optimal strategy and there is no way to uniquely select this criterion. In a game with humans, things are much more complicated.
Game theory allows building models of uncertainty arising not due to blind chance (as in the theorist), but due to opposition of other people. Here is an article that compares these types of uncertainty. The author seems to have a good understanding of games and markets.