We just received an e-mail from a reader to inform us that former trader Nicolas Dickreuter of penny auction PsychoAuction.com, will soon be opening PsychoBanker.com.
“This is how it works: You can buy the “nothing” at the current price and with each purchase the price will increase by a percentage. When somebody sells it, the price will be reduced by the same percentage. If you buy early and wait until other people buy, you can sell it at a higher price. Or alternatively if you think that the price will go down, you can sell it short and reduce you position once the price is lower and make a profit that way. PsychoDollars can be exchanged back into real dollars.
The whole game is 100% about psychology. Do you think that other people will buy. Do you think that they think that you will buy? The concept is based on game theory and several nobel prices have already been awarded for the subject. If you think you are good at psychology and reading charts etc, you should definitely have a look at the site. “
PsychoBanker has not yet opened and we’ll update you when we receive more information. We’re not quite sure yet what this site will be about or if it is anything like a penny auction, but it is interesting that they add game theory and psychology into the mix. What do you think of the PsychoBanker concept?
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caveninit November 8, 2009, 2:14 pm
I have no idea what you just said….lol…I think I need coffee to help wrap my head around this one…
Unknown November 8, 2009, 3:51 pm
yea.. lol me 2… i was scratching my head after i got done reading this..hehe
ndn0521 November 8, 2009, 7:16 pm
Lol..the only thing i understood was something about psychology and i know it's not for me..because i failed my psychology class twice:)
Ryan November 9, 2009, 11:05 am
Always sell short "nothing."
Nicolas December 5, 2009, 11:33 am
PsychoBanker is a simple concept, based on the so called game theory, for which already 8 nobel prices have been awarded. Let us first explain the rules of the game and in a second part give you some advice on strategies.
PsychoBanker is a virtual world where you can buy real world objects with virtual money. The objects are:
– The big nothing (can be delivered in an empty envelope)
– Hot air (no guarantee it’s still hot in case you want it delivered)
– Sandcorns: Can be delivered, but standard shipping and handling costs apply
In many cases you will not want the objects delivered to you but you will sell them back to us, if possible at a higher price. If you believe that the prices will go down, then you can borrow them from us and sell the object, although you don’t even have it. That way you can make a profit even when prices go down because you will buy back the borrowed objects at a lower price than at the price you sold them (remember always buy low and sell high). More to this in the section below called “short selling”.
You can always only buy or sell one object at a time and you can only buy or sell it to PsychoBanker.com. So it’s not like a trading platform, where people can buy and sell objects to each other. On PsychoBanker you can only buy and sell from and to PsychoBanker – so it’s more like a one-stop shop where we take back the objects that you buy from us at a price which is determined by the following rule:
Pricing of the objects
Whenever somebody purchases an object from us, we will increase the price at a percentage, which is dependent on the object (usually around 2.5%). If somebody sells an object, the price will be reduced by the same percentage. The change will always take place right before the purchase or the sale. This means you need to be careful. If you buy an object, you should wait until the price increases as you will make a small loss otherwise, because in buying the object you move up the price but if you sell it right away you will only be able to sell it at a lower price. The same applies for a short sale. If you sell the object short you should wait until prices go down a bit before you reduce your position to make a profit.
Why would anybody want to buy the Nothing of the Hot air?
It is important to understand that the whole game is about psychology since there is only a virtual value in the goods that are sold on PsychoBanker. So you should only buy because you think that others will buy, while they will only buy when they think that you will buy because they think that you think that they will buy. That’s called “game theory”. This of course leaves open to a lot of tactics that you can make others believe that you will buy in showing them that you are buying. You should also talk in the chat with other people and see what they think that you think that they think. There might also be a panic and everybody will want to sell which will cause even more panic. So you need to make sure you are the first one to move. If you manage to become the trend setter and move the markets, the chances you make a profit are high.
Another way to make money is to read about chart trading and try to follow the trend. On the internet there is a lot of literature about chart trading, finding patterns and also following the trend. While not everybody believes in these strategies, a lot of people claim to have made a lot of money with it. If you think this is something for you, you should explore it further on the internet.
Exchanging PsychoDollars to US Dollars
The current exchange rate from PsychoDollars to US Dollars is 1:100 and unless there are any portfolios with a negative balances (which is theoretically impossible, and we’ll do everything to avoid it), the exchange rate will remain.
You can only withdraw money, if all your positions are at 0.
The different objects
Each of the 3 objects that are sold on PsychoBanker have their peculiarities:
The Big Nothing (2.5% spread)
The big nothing is probably the most popular item on PsychoBanker even though the name is highly misleading. The big nothing is in fact worth much more than nothing and its value can potentially be unlimited.
The big nothing has a spread of 2.5%. This means if somebody buys or sells, the price goes up or down by 2.5%.
Hot air (1.0% spread)
Hot air is the second object we are selling. If you want it delivered to your home we put hot air from our office rooms into an envelope and send it to you (no shipping costs worldwide). However we cannot guarantee that the air is still hot when it arrives at your place, so it may be more profitable for you to simply sell it back to us at a higher price if you can. We’re happy to do that if prices have moved up because other people also like our hot air.
When somebody buys or sells hot air the price only moves by 1%. This means it’s less risky to lose money, but you can also win less than in other objects which have a higher spread. If you just buy and sell it right away, you will lose less than in objects with a higher spread.
Sandcorns (5.0% spread)
Sandcorns are the most volatile assets. If somebody buys, the price goes up 5% right away. You can potentially make a huge profit on them very quickly, but there is also an increase danger of losing PsychoDollars with it as prices can move down equally quickly.
Selling short (borrowing objects from us to sell them and make a profit when prices go down)
While PsychoBanker is clearly not a stock market, it does have some similarities. Prices will be governed by greed and fear. I can be expected that prices will go up very quickly because everybody want so to buy early. People will want to make more and more profit. But at some point, there will be somebody who sells and prices will be reduced. It is possible that other people get scared and will want to sell as well so prices will go down even quicker. If you see this coming, you can sell the object short. This means you first have to reduce the position to 0 and then press the “sell short” button.
The red bar below the short sale button will indicate how much more you can sell short. Depending on how much cash you still have, you can sell more or less. But be careful. Selling short can be very dangerous as you are lending objects from us. If we see that prices go up (which means you make a loss) and we think you have no longer enough PsychoDollars on your account, we may simply take back our objects that we were lending to you at the current price. This is necessary as you might end up with a negative total balance otherwise. Imagine if you sold an object at 1 and the price suddenly goes up to 1000. Then you would need the cash to buy it at 1000. If you have that in your account, we are fine with it, but if you don’t, we’ll want it back before it’s too late.
The progress bar below the short sale button will indicate how much more capacity you have. If it gets red all the way through, we’ll probably take it back from you and you’ll make a loss.
Generally it’s a good strategy to sell short only a small amount and if you see that prices move back up, you should reduce your position fairly quickly, that way you can avoid big losses.
In addition to your own restrictions how much you can sell short, there is also a restriction on each object how much we are willing to borrow. For example we won’t borrow any objects if nobody has bought them yet. We only borrow a maximum of 25% of the objects that have been bought from us. This number may change without notice but it won’t affect you if you have already borrowed something from us, so you don’t need to worry about it.
Some thoughts on strategy
As always, a good strategy will take some time to develop. It’s best to first observe the different players and see what they are doing. Only in a second step you should jump in to buy or sell the different objects.
Be aware that it’s all about psychology and that if you think that you know what you think that other people think that they think that you will buy, you should definitely buy.