Thursday, September 5, 2013

Computer Poker

I've had some notes in the can for a while about computer poker research. There's an NYT article today about it.

"Dahl recalls staring at his computer screen, watching his neural nets compete, when he saw one of them make a fairly sophisticated bluff known as floating. You do this by playing passively, initiating no bets and matching the ones that your opponent makes. If, after the turn card is played, your opponent does not bet, you do. His slowing down usually means that he had been overplaying his cards with the hope that you would fold or his hand would improve. Your bet here signals that you’ve just made a strong hand or that you have been inducing him to put as much money as possible in the pot because you have had a superior hand from the start. 'At first, I wasn’t even familiar with that strategy,' Dahl says. 'Later, I thought it was amazing that the neural net could come up with a known, successful strategy on its own.'"
Poker is won or lost before the game is even started.

8 comments:

Stagflationary Mark said...

Assuming that professional institutional traders have more sophisticated algorithms than typical retail investors (not a big assumption), then the typical retail day trader has lost before the game is even started. ;)

CP said...

Going to have to disagree with you slightly.

The institutions are more competitive on short time frames but not longer. Because of institutional imperative to gather assets.

Stagflationary Mark said...

Day trading is a "longer" time frame?

CP said...

No. Institutions can never ever ever go to cash.

Stagflationary Mark said...

I would find it very hard to believe that there aren't any professional institutional traders competing head to head with retail day traders.

In any event, I would definitely argue that the *typical* retail day trader has lost before the game is even started.

Do Individual Day Traders Make Money? Evidence from Taiwan

Heavy day traders earn gross profits, but their profits are not sufficient to cover transaction costs. Moreover, in the typical six month period, more than eight out of ten day traders lose money. Despite these bleak findings, there is strong evidence of persistent ability for a relatively small group of day traders. Traders with strong past performance continue to earn strong returns. The stocks they buy outperform those they sell by 62 basis points per day. This spread is sufficiently large to cover transaction costs.

As Warren Buffett once said...

As they say in poker, “If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.”

CP said...

Agree with you about "trading" but not about "investing".

Anonymous said...

Poker? I hardly knew her.

CP said...

Q: What did the dealer say to the deck of cards?

A: "I can't deal with you anymore."