Waiting for opposing strong traders to leave, lightening up going against the masses, and false rumors.

Continued discussion of comments about buy/sell tips appearing in Market Wizards: Interviews with Top Traders

Paul Tudor Jones.

Q: I know you talk to traders in virtually every major market on an almost daily basis. Are you uncomfortable about being on the opposite side of the fence from these people?
A: Yes. Who wants to fade a winner? I want to be with them because I make a point of talking to the people who have the best track records.

Q: How do you keep all these other opinions from confusing your own vision? Let’s say you are bearish on a market and 75 percent of the people you talk to about that market are bullish. What do you do?
A: I wait. I will give you a perfect example. Until Last Wednesday, I had been bearish on crude oil, while it was in the midst of a $2 advance. The best crude oil trader I know was bullish during that period. Because he was bullish, I never went short. Then the market started to stall and one day he said, “I think I am going to go flat here.” I knew that instant – particularly, given the fact that bullish news was coming out of OPEC right at that time – that crude oil was a low-risk short. I sold the hell out of it, and it turned out to be a great trade.

Q: Are there any market advisors that you pay attention to?
A: Marty Zweig and Ned Davis..Bob Prechter…

Gary Bielfeldt.

The article about his interview did not cover what he does with tips.

Ed Seykota.

Q: Do you ever use contrary opinion as an aid to your trading?
A: Sometimes. For example, at a recent goldbug conference, virtually all the speakers were bullish. I said to myself, “Gold is probably near a bottom.” [The market did indeed rally after that conference.]

Q: Would you buy because of that type of input?
A: Oh no, the trend was still down. But it might get me to lighten up my short position.

Q: Do you use any outside advisory services?
A: I keep track of a lot of outside advisers, mostly by reading the business press or hearing from my brokers. The services are usually break even, except when they start to gloat, then they are likely headed for trouble…

Q: How about market letters?
A: Market letters tend to lag behind the market since they generally respond to demand for news about recent activity. Although there are certainly important exceptions, letter writing is often a beginning job in the industry, and as such may be handled by inexperienced traders or non-traders…

Q: Do you use the opinions of other traders in making trading decisions or do you operate completely solo?
A: I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing.” The old-timers, who talk about “maybe there is a chance of so and so,” are often right and early.

Larry Hite.

The article about his interview did not cover what he does with tips.

Michael Steinhardt.

The article about his interview did not cover what he does with tips.

William O’Neil.

An excerpt from his book How To Make Money In Stocks was quoted.

“6. Mainstream America delights in buying on tips, rumors, stories, and advisory service recommendations. In other words, they are willing to risk their hard-earned money on what someone else says, rather than on knowing for sure what they are doing themselves. Most rumors are false, and even if a tip is correct, the stock ironically will, in many cases, go down in price...”

“9. Most investors are not able to find good information and advice. Many, if they had sound advice, would not recognize or follow it. The average friend, stockbroker, or advisory service could be a source of losing advice. It is always the exceedingly small minority of your friends, brokers, or advisory services that are successful enough in the market themselves that merit your consideration. Outstanding stockbrokers or advisory services are not more frequent than are outstanding doctors, lawyers, or baseball players. Only one out of nine baseball players that sign professional contracts every make it to the big leagues…”

...continued tomorrow...

Copyright 2008 Raymond T. Lee. All rights reserved.
Leisurely e-Mini Futures Trading
eMail me Comments