Game theory: 8 games for traders

Beyond Monopoly

Trading has a lot of similarities to playing games. Although at first blush this sentiment can seem outlandish, just stop and think about it for a moment. Both are constrained in ways that the real world isn’t; both have set rules that dictate what moves you are allowed to make; both (usually) have clearly defined winners and losers.

There are a number of other similarities as well, some of which will be discussed later. So, with so much in common between these two worlds, it should come as no surprise that traders can find value in taking a break to play a game. Fortunately, a gaming revolution has occurred over the last 20 or so years, with not only video games becoming more sophisticated and mainstream, but also a number of designer board games being released. While Monopoly may be the first one you think of, games have come a long way since it was released in 1935. So, whether you’re just looking for something to play with the family or something a bit meatier to really burn your brain, here are eight board, card and video games that traders are sure to love.

1. Poker – Card game

We’ll just take care of this one right off the bat. Regardless of your thoughts on poker, at least one New York judge ruled last year that it is more a game of skill than chance, and as such is not gambling. Thus poker, like many other card games in which money can be involved, is a quintessential example of Game Theory, which is based on systems where one party’s gain always is another’s loss — a zero-sum game. Sound familiar? Trading is built on the same premise — you only make money on a good trade if someone loses money on a bad trade. 

Additionally, few great poker players make consistently good decisions based on emotions or gut reactions. In the same way, trades made on feelings and not according to a prescribed trading plan rarely work out well on a consistent basis. In both poker and trading, having the discipline and perseverance to stick to a plan can put you on the path to success.

2. The Settlers of Catan — Board game

Arguably the Settlers of Catan board game sparked the board game revolution when it was released in the United States in 1995, and has since become a mainstay in many people’s collections right alongside Monopoly. It has become popular with multiple groups also, including Silicone Valley execs and venture capitalists. In this game, players represent groups that are establishing colonies on the island of Catan by building settlements, cities and roads. To do this, though, they must spend resources they collect throughout the course of the game. These resources are gathered either via random dice rolls at the start of each player’s turn, or through players negotiating trades among one another.

This aspect of trading is where the meat of this game lies. Because the game is played on a modular board that can change every game and the random dice rolls, some resources can be abundant in one game but rare in others — as such their value can vary dramatically. This is the aspect traders will love as they vie against their opponents to always be on the better side of a trade. Usually, the winner is the person who was able to make the best trades throughout the course of the game.

3. Trading simulators — Video game

A number of Internet websites have put out excellent trading simulators that let players have a taste of trading in a fun environment. A couple of examples include CME Group’s simulator where traders play as either a speculator or hedger trading lumber futures, and MarketWatch’s Virtual Stock Exchange Game. These differ from trading simulators offered by brokers in that they are intended as games, and not a training environment, although many lessons still can be learned. Simulator games are a bit more straightforward because they try to replicate conditions traders may encounter while trading, but given the competitive nature of many traders, the challenge is trying to do better than anyone else playing.

4. Crude: The oil game — Board game

In Crude, players take on the role of energy company CEOs attempting to expand their companies into multi-national mega-corporations. To do this, the game simulates the market forces and elements of the oil and gasoline markets at all levels of production, including oil drilling, oil pumping, oil and gasoline buying and selling in the domestic and foreign markets, refining and finally, gasoline selling to the consumer, all while simulating changing market environments. 

In addition to the theme of the game, another aspect traders will enjoy is the strategy decisions. Just as a trader can be a scalper and go for lots of small profits or be a trend-follower and look for the big payouts, Crude gives players a choice of how to play the game. Do you line up all your assets and go for the big score, or do you spread out to get lots of little wins? 

5. Euchre/Canasta/Spades — Card games

These largely depend on your geography as to which one is popular in your area, but essentially they are all trick-taking games in which you and a partner are trying to accumulate the most points by playing the highest card over a number of hands. The interesting part comes in when you consider trump suits. In some games the trump suit changes each round, whereas in Spades it always is the same, but the idea is any card played from the trump suit counts as higher than the highest card of any other suit. 

To be successful at these types of games, players must keep track of the changing rules and which cards have been played. In the same way, traders need to consider the ever-changing trading environment and upcoming economic reports. A single report can completely change the trading trajectory, and keeping track of what reports are coming when is crucial.

6. Lumosity — Video games

Staying mentally acute and alert is a necessity for many parts of life, especially for trading. You don’t want to be daydreaming when some surprising geopolitical action is announced and suddenly find yourself on the wrong side of a trade. That’s where games like those offered at Lumosity.com are helpful. 

Lumosity offers a variety of games all with the intention of boosting a particular aspect of mental acuity. Some games target your memory recall, while others may focus on your attention span, while still others work on your problem solving. They start easy and progressively get more difficult as the game keeps track of your improvements. Small improvements in any of these areas can go a long way in enhancing trading performance.

7. Power Grid — Board game

In Power Grid, players take on the role of energy company CEOs that are trying to expand their network of power plants across the country. Players do that by outbidding one another for the most efficient power plants, purchasing different fuels from an ever-changing market and buying licenses to power different cities.

It sounds easy, but this is a game that rewards sound money management. If you don’t plan your moves accordingly, or just blow all your money on one aspect of the game, you’ll quickly find yourself without the funds needed to stay competitive. Traders especially will appreciate the auction phase of this game where players are bidding to get the best power plants available, all while balancing their funds for other aspects of the game. This is a game where every dollar matters.

8. Pit — Card game

The trading pits may be disappearing in real life, but you can still have some fun simulating them in this classic game. First released in 1904, this is a game traders are sure to love. Played with a special deck of cards with different commodities printed on their faces, play occurs simultaneously as players try to “corner” the market in one of the commodities by getting nine of the same commodity in their hand. They do this by holding out a number of cards and raucously yelling to all other players the number of cards they wish to trade. When another player offers the same number of cards, they trade facedown, and play continues until one player corners the market. 

These are just a smattering of the great board, card and video games now available. Watch FuturesMag.com as we explore each of these categories further and offer more games that traders are sure to love.

About the Author

Michael McFarlin joined Futures in 2010 after graduating summa cum laude from Trinity International University, where he majored in English/Communication.