Hedge funder Paul Tudor Jones doesn’t adhere to traditional investing rules, but it doesn’t seem to be hurting him.
Jones likes to stay on the right side of a predominant trend, and uses the 200-day moving average as a gauge, writes Josh Brown in his blog The Reformed Broker. Jones has a word of advice for his undergraduate students at the University of Virginia: “get out of anything that falls below the 200-day moving average.”
“You always want to be with whatever the predominant trend is,” Jones says. “If you use the 200-day moving average rule, then you get out. You play defense, and you get out.”
Jones’ method may work for his own money, but using such an approach for clients could be wrong, writes Brown. Right now the trend seems to be trendlessness. “The kind of trading that Tudor does would be wholly inappropriate for wealth management clients, but it’s remarkable how universal this idea of respecting trend can be – and how versatile when applied to lower-turnover strategies,” he writes.