Nash Equilibrium

Consider 2 traders, with 3 different strategies at their disposal, ie. daytrade (DT), swing trading (ST) and long-term trading. The payout table is as follows:

                                                      Trader #1
                                         DT              ST              LT
             DayTrading         1,1               5,1             20,1
Trader   SwingTrade        1,5               5,5             20,5
#2         LongTerm           1,20             5,20           20,20

If trader #1 is daytrading, the highest payout method for trader #2 is long-term trading. This is highlighted in RED and denoted as "1,20".

If trader #2 is daytrading, the highest payout method for trader #1 is long-term trading. This is highlighted in BLUE and denoted as "20,1".

The best strategy for both traders is long-term trading, denoted as "20,20". This outcome is known as Nash Equilibrium. Both traders will get the maximum profits from co-operating to trade long-term or holding on trades for long periods while other traders who day-trades or swing trades will lose out.