Author Bio

Automated Adam, Discretionary Derrick…meet Team-trading Tom.

There are many types of traders on this earth. Regardless of whether you trade forex, futures, or equities, you understand one thing. Your success depends on your long term ability to determine accurately which securities to play in, how much you enter a position with, and when you enter and exit a position.

For automated system traders, the initial parameters of mixed oscillators and indicators can be a large determinant to how you perform even after you’ve optimized it. You understand the market can be bipolar and act completely irrational and work against your system when you least expect it. You make money from the market largely due to the statistical edge you’ve gained through proper back testing and scrutinizing the losses far more than your possible winnings. Even then, you realize that not all systems will be forever profitable for the lone reason that the market is essentially human and no mathematical model can accurately and fully describe human behavior.

If you are the discretionary trader, then you realize what the automated trader does but you also see patterns; some may even “feel” them. Profitable intuitive traders can “feel” the current of the market’s waves much like a surfer “feels” the ocean’s flow. Discretionary traders are also adept with support & resistance, chart patterns, candlestick patterns, Elliot wave theory, and Fibonacci points – on top of risk management theories and the usual list of indicators and oscillators.

Now. There is a third type of trader. One who can be one of the aforementioned types of traders on top of being a team player. This trader is capable of gauging support and resistance without needing to draw a line at all. This trader is capable of connecting to those which are better than them, those who are equal to them, and those who want to be as good as them. This ability to collaborate adds a “whole ‘nother way of lookin’ at the game.” This trader realizes that this information resource is invaluable since they realize that they can see what most others cannot. They may have the insight of a discretionary trader or the discipline of a automated trader. However, with this new level of analysis, traders will have the ability to filter out their methods of trading with social indicators and can see the community bias on the balance of the market.

Years ago when I starting doing forex, since it was all new to me, I spent a lot of time just reading website after website looking for information and learning everything I could get my hands on. It was to the point that I woke up every morning and immediately starting thinking forex. I was not trading live yet, but I learned everything I could. This included risk management involving gambling theory, chart patterns, various indicators, and trading systems. I starting getting into it, digging myself a hole until I was buried. Why was I drawn to it so much? It was a few things: I liked how everything could be visual on graphs, the way money exchanges hands has mesmerized me since I was in elementary school, it involves technology, but most of all it involves people. People watch birds; I watch people. Not in a creepy way but to observe human social interactions and motivations. I think I’ve always been like this. So, when I had the chance to jump on board with Currensee, I was all over it.

This opportunity lets me see things in a completely new way. If I had to describe myself, I’d be mostly an automated trader. I like developing a mechanical means of reading the market where discipline is absolute and it can work for me non-stop. At Currensee, I’m a bit of all these types of people. I’ve taken it upon myself to beat my biggest weakness, discretionary trading and discipline. I’ve narrowed it down to the necessity for me to follow my rules and to learn from my mistakes. And, now, I’m teamed up with other people. I can trade real-time with them while messaging, posting and starting new discussions. I can even make strategies around them if I care to. I can also learn from traders who are better than me and teach traders who don’t know as much as me. All while getting information on the community’s trades and opinions on fundamental news and currency pairs.

If you asked me a few months ago if I thought I’d mix up my automated trading approach, my answer probably would have been “hell no.” It works and why change something that’s not broken. I’ve gotta say that team trading has opened up a whole bunch of new ideas and strategies for me. I’ve connected with people around the globe – people who trade differently than me. And I’m challenging myself by using several different approaches – something that’s hard to do with a machine.

So, that’s my take. I’m curious to know what you think. Is your trading style open to some team spirit?

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

One of the games which is repeatedly used as an example in game theory is called the Prisoner’s Dilemma. In this game, two prisoners are caught and they are each given the choice to cooperate with each other or turn on each other. This game has been used to simulate various real life scenarios including many economical situations and in essence describe any un-trusted transaction between people.

In 1984, Robert Axelrod conducted an experiment in which he asked scientists to play in a tournament of repetitive prisoners dilemma with one another – by creating the repetition of the game Axelrod made it possible for people to adapt their strategies and also created a memory in the game such that each player plays the next iteration with the knowledge of the strategy his opponent played in the previous iteration.

The winning strategy was found to be “tit-for-tat”, which leads to a balance of cooperation between the two prisoners.

Axelrod then conducted another tournament where he disclosed the winning strategy. The surprising thing he found was that even though everyone knew the winning strategy, it still remained the winning strategy. So collaboration on the strategy did not affect the game in any way.

Another variation of the prisoner’s dilemma is called an assurance game and is most commonly known as “Hunt a Stag.” In this game, two hunters can choose to collaborate and hunt a Stag (large and tasty adult deer) or split and hunt a rabbit alone (smaller but just as tasty).  The difference between this game and the Prisoner’s Dilemma is that players are allowed to communicate and choose to collaborate.

So creating a proper mechanism for communication and trust between players is essential for collaboration.

One other commonly used game is called the tragedy of the common. This game is played by several players that share the same resources. In this game it has been shown that if the players act independently in their own best interest they would eventually deplete the resource, which is not in their long term best interest. Elinor Ostrum, a political scientist, has researched the matter looking at various communities around the world that share resources. She actually found that it’s true and that most communities have depleted their resources, which was not in their best interest. But she also found something else; there were many communities that didn’t deplete the common resources and managed to sustain a long-term preservation of these resources. By looking closely at communities that succeeded vs. communities that failed she discovered that communities that succeeded in preserving these resources managed to establish institutions for collective actions, and that collaboration was the main reason for the positive outcome.

Robert (Yisrael) Aumann and Thomas Schelling received the Nobel Prize in 2005 for their work on collaboration in games (“The tile of Aumann’s work is “Conflict and cooperation through the lens of game theory”) and addressed the question of which games would promote collaboration and why people chose to collaborate. Part of Aumann’s findings was that multi-player repetitive or infinite games promote cooperation between players because people learn to collaborate in time.

Another contributing factor to cooperation is introduced by some irrationality in the players, meaning that perfection and uniform thinking does not lead to collaboration. There is a need for some of the players to act differently than others given the same situation in order to promote collaboration or, as George S Patton described it, “If everyone is thinking alike, then somebody isn’t thinking.” — George S. Patton.

So if we look at all of these examples we can see that in multi player infinite games with some irrational behavior (like trading for example) sharing and collaboration are always in our best interest. In my mind we still haven’t begun to realize the true potential of collaboration and the payoffs it would yield but we can clearly identify that collaboration, in the eyes of game theory, leads to greater success.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.