Quote:
Originally Posted by tisonlyi
This world view based on game theory needs, as a prerequisite, absolutely rational actors making absolutely rational decisions without cooperation between players.
Unfortunately, people do not enter markets with rational intentions. They do not enter the market with anything approaching rationality. People, aside from economists, psychopaths and the autistic/aspergers will always find ways to cooperate rather than engage in cut-throat competition. No matter what the market, no matter what is being traded.
Even Nash, he who refined these theories to exalted levels, does not now accept that his theories can be applied to any human endeavour. We're not wired that way.
Wolf and sheep, lambs and lions. Ubermensch and untermensch... With knowledge comes the realisation of a lack of understanding, with understanding comes a realisation of a lack of knowledge.
The world is not black and white, superior and inferior, right and wrong.
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The world pretty much is black and white. You live, you die. You make money on a deal or you don't. Your wife is pregnant or she is not...
But, I diverge. I currently need people like you in the "market". People who believe the market is not rational give opportunity to those who do. Lately, I have been using a simple option trading strategy of buying a call and buying a put at the same/similar strike prices and expiration dates, pretty much betting on big swings in the market from those extreme views of market value of major indexes. Now that the "market" is in a clear up trend this trade is no longer as effective as it was, but that was predictable too.