Friday, August 7, 2009

Trading is like Warcraft

There are so many applications that a RTS(real time strategy) game like warcraft can have for a trader.

There have already been many documented cases of where pro-gamers have become poker players, and poker players have become traders and vice versa.

I have been fascinated with the relationship between pro-gamers, poker players and traders for a long time, and there are a few reasons that can determine why the activities have similarities, and why certain personalities gravitate towards a higher performance in these activities.

Key Overlapping skills between Warcraft and Trading
- It's about changing dynamic, but within a framework that is defineable.
Before you matchup against another player, each player has a defined race (4 possible races), both with its strengths and weaknesses - focusing purely on your own race (and only your strategy) will usually lead to being defeated by a much more prepared strategy from your opposition - or the outcome will be determined by luck. Before you trade a session of the index, it is critical to identify whether the market will be rangebound, trending for the session, in order to determine your main strategy for the day's trades.

- Without a predetermined strategy (a strategy that is continually repeated) you're going to have trouble against someone who has practised the mechanics of moving their army, building things in a certain order. Order is absolutely essential, but order can be variable.

- Variability/Flexibility; You have to be able to have a counter - strategy for all possible strategys that your opponent may take, once again it's about defining your environment and adapting to what it is showing you.

- Learning from mistakes, and learning from pros - each warcraft game has an inbuilt save function, which saves the last game you played - every trade that you make should be reviewed, and you should be able to find where you are weak. Another concept that defines traders, is having a mentor to follow - and warcraft has professionals who have games that you can watch and replicate quite easily. In both warcraft and trading - you actually learn more from losing than winning.

-multi-tasking; in the game of war3 you need to be able to multi-task building, attacking, and scouting - within trading, you must be constantly looking for ideas, watching dynamic feeds, whilst managing risk in your current trades - multi tasking aspects within itself.

- Predicting based on the past - Warcraft has map terrains that have predictable, and possible spots where the opponent must creep - it is so advantageous to time a creep jack, to backstab your opponents - within trading this is like identifying key price areas and creating trades around these points - as they offer the greatest predictability in risk/reward.

- Response time is critical - Knowing when to attack, defend, position are key subtleties of a game that plays a complete metaphor for trading intra-day. 5 minute charts and tape reading (market depth) are key subtle activities that 90% of the population won't be capable of - but those that have the ability and master it, can become pretty much reliant on this edge to survive in the trading world.

- Taking risks and managing risks - Creeping in certain spots, and getting your hero level high quickly is the aim, but this leaves u vulnerable to base raid or a backstab - not being aware of the risks you are taking will lead to default losses - even when you make money with high risk trades, the bad habits that you form will make you lose money in a later trade; probably when the stakes are even higher.

- Battles are a sum of small edges - When players become competitive and sufficient, the smallest detail will determine the outcome - one extra unit, slightly better micro, better position, hero level - you can't really explain the outcome on just one variable. Trading is so similar that once you get to the highest level with the highest stakes, you probably working with the sum of all your trading edges that you develop as you make mistakes, review your play and continually work on the routines that keep you preserving your capital.