PTJ on being on the right side of the trend

There’s more than one way to skin a cat. The stuff that Paul Tudor Jones has made his billions based on does not appear in any traditional investing text book. Ben Graham would read his stuff and roll over in his grave.

For example, the idea of being on the right side of a predominant trend – bring a concept like this into the Church of Value Investing and you might see the holy water begin to boil. And yet, it can work if applied correctly.

Here’s PTJ on his own chosen trend indicator, the 200-day moving average, via Tren Griffin at 25iq:

One principle for sure would be: get out of anything that falls below the 200-day moving average.”

I teach an undergrad class at the University of Virginia, and I tell my students, “I’m going to save you from going to business school.  Here, you’re getting a $100k class, and I’m going to give it to you in two thoughts, okay?  You don’t need to go to business school; you’ve only got to remember two things.

The first is, you always want to be with whatever the predominant trend is. My metric for everything I look at is the 200-day moving average of closing prices.  I’ve seen too many things go to zero, stocks and commodities.  The whole trick in investing is: “How do I keep from losing everything?”  If you use the 200-day moving average rule, then you get out.  You play defense, and you get out.

Josh here – We run a tactical model in-house that is designed to respect trend and omits the kind of touchy-feely pseudo-intellectualism that often accompanies market or economic prognostication.

Part of this is because there is no Why. Or, more reasonably, if there is a Why, it is only very clear to the majority of people after the fact. Trends are confirmed or violated as a result of the process by which markets attempt to figure out the Why, in real-time. When the the crowd feels confident that it’s got the What and Why figured out, a trend solidifies. When this confidence is shaken – in either direction – a trend becomes invalidated and a new trend is born. Even if that new trend is trendlessness – what we’re going through so far in 2015, for example.

The kind of trading that Tudor does would be wholly inappropriate for wealth management clients, but its remarkable how universal this idea of respecting trend can be – and how versatile when applied to lower-turnover strategies.

Incidentally, after 8 months of consolidation, the US stock market’s primary trend is now flat. This can be a confusing time for people without a plan, people who are looking to headlines for guidance or who may be hoping to make it up as they go along. Doing so with one’s own money is one thing, but with other people’s money?


A Dozen Things I’ve Learned from Paul Tudor Jones About Investing and Trading (25iq)



This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web