What are the major elements of your trading philosophy? The word "trading" is not the way I think of things. I may be a trader in the sense that my frequency of
transactions is relatively high, but the word "investing" would apply just as much, if not more. In my mind, trading
implies an anticipation of a sale at the time of purchase. For example, if I go long stock index futures tonight because
I expect tomorrow's trade number will be bullish for the market, and I plan to sell my position tomorrow—that is
trading. The bulk of what I do is for a much longer duration and for more complex reasons. For example, when I went
long the debt markets in 1981,1 held that position for two and a half years.
Well, for purposes of this book, I would still call what you are doing trading. How then do you define the difference between trading and investing?
I make two key distinctions. First, a trader will go short as readily as long. In contrast, the investor—for example, the portfolio manager of a typical mutual fund—will always be long. If he is un- certain about the market, he may be only 70 percent invested, but he is always long. The second distinction I
make is that a trader is primarily concerned about the direction of the market. Is the market, or stock, going up or
down? The investor is more concerned about picking the best stocks to invest in. There is no value judgment involved
in my distinction between traders and investors, it is merely a matter of maintaining a certain thematic focus for this
book. In any case, on both counts, I would certainly qualify you as a trader. To get back to my original question: How
would you define your philosophy of trading?
My particular style is a bit different from that of most people. Concept number one is variant perception. I try
to develop perceptions that I believe are at variance with the general market view. I will play those variant
perceptions until I feel they are no longer so.
