Trade high probabilities using game theoryAccording to statistics, 95% of traders are losing longterm. Not because they lack skill, but because they involve in high variance (or poor probability) situations.
What is game theory? we can define GT with three principles.
*People dont want to lose. (hence.. predictable).
*People buy good things at good price, or they are profit maximizing.
*Everyone is strategic.
** we assume that "nobody can predict future".
** markets respond to feedbacks or signals.
Practice: the higher something goes, potential narrows and risk increases. Deeper something falls, "potential" becomes attractive. Once market decides that it will fall -- people assume crash as possibility. People who can buy at a strong trend line - has benefit of having more information.
(1) Downtrending VIX highs and accumulating lows. a strong signal about SPX peak, with everyone expecting a market correction before US election. ---> GT in practice.
(2) pre-election. Markets be wobbly, pointing to 50-50 probability or risk. Maybe there was fear of NVDA/AAPL high valuations, or the fear due to Trump tariff policy (markets are 6m forward looking) as bond yields were rallying.
If we assume statistically, markets boom after elections. We can predict GT in action (or call it market forces). imo that still is a profitable risk.
People hate uncertainty and they love guarantees. So the "wobble" was reasonable.
(3) VIX higher low.. predictably (GT) sell off follows. Almost as by the book.
other way to put it? people maximize potential while minimize loses/risk. There are periods of volatile markets and periods for one directional rallies.
P.S. Blue arrows are longterm macd turning points.
