A good introductory book is Thinking Strategically - The Competitive Edge in Business, Politics, and Everyday Life by Avinash K. Dixit and Barry J. Nalebuff
When I was a new trader I thought trading was a tactical game.
(Buy when x crosses y and sell when y crosses x). I knew I had to trade with the trend, but how to do it and avoid the losing trades was the name of the game. After awhile I noticed similar trades. I could enter and have a feeling the trade was going to workout. I don't believe much in intuition so I went on a search to find out what was going on.
What I did was draw a sine wave on a piece of paper and mark the days high and low as the extremes of the wave. Then I marked the open and close in relation to the high/low. I noticed after a month of doing this that I had x days of one type and y days of another and z days of yet another, etc. I started dating the sheets and putting them in piles and did it everyday. What I found was a finite number of behaviors present in my market. I went back to the piles and figured the best entry and exit for each behavior I found. Then I tried to estimate which behavior was likely to be present in the market each day. If I suspected behavior 1 was present all I did was follow the best entry/exit and stop placement (if it wasn't that type of day) for the 1 pile. If behavior 2 then follow the 2 pile best strategy.
The exercise taught me that my entry/exit only had relevance in light of the best strategy for the market I was trading. In essence, the strategy is much more important than anything else I can do. By focusing on the strategy my work is limited to determining what type of day I'm seeing and then working to optimize the entry and exit in light of it. I found it much easier to trade any market by using this approach since I didn't have to determine "are we going up?, down?, trending?, rangebound?, etc. in realtime"
I've known for awhile that trading is a strategic game and game theory helps focus the mind to think in terms of determining and picking the best strategy for the situation.
) but that properly applying a statistical test or analysis was of paramount importance. I mean, just as in all disciplines, the topics can be simple enough to comprehend, but applying them properly requires real understanding.