John Thomas the Mad Hedge Fund Trader

John Thomas—the Mad Hedge Fund Trader—made his first trade 60 years ago on his Dad’s brokerage account at 11-years-old. He started trading full-time in 1973. From observations, he learned that people knew nothing about the market but were making millions of dollars. From talking to a lot of people that knew a little, he learned a lot. He tried different systems and approaches over the years. Listen to this episode of How To Trade It to gain knowledge from his decades of experience.

In this episode of How To Trade It we learn tricks of the trade from John Thomas: The Mad Hedge Fund Trader. Don’t miss it! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet

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You’ll want to hear this episode if you are interested in...

  • [1:03] John’s history with the financial markets
  • [3:46] The challenges that John faced
  • [5:47] John’s key success principles
  • [10:15] The market timing index
  • [12:47] A conversation on Tesla
  • [19:02] John’s investing strategy
  • [25:20] About the Mad Hedge Fund Trader

John’s key success principles

John’s #1 strategy is to buy low and sell high. Secondly, he does the opposite of what everyone else does. When the flight emotion is triggered, you get your best trades because everyone in the world is dumping while you’re buying. When you see euphoria, you start dumping.

For example, he started shorting Tesla in February. While he got stopped out twice in January, he got in when the stock dropped by half. John knew as soon as he got a factory tour in 2009 that he wanted in on it. He bought Tesla stock at $3.30. John got Bank of America at $5 and Amazon at $20 in 2008.

He notes that generally, the world doesn’t end. It always comes back. Over the last 80 years, the stock market has gone up 80% of the time, including depressions. But John notes that when you get to situations as we had in February, the risk/reward of entering new positions is terrible. Sometimes it’s more valuable to have cash. You don’t always have to take a position every day of the year.

The market timing index

John uses an algorithm that he calls the market timing index. It’s accurate 95% of the time and tells them when to short the market. How is he trading this year? This year is the “year of the barbell.” His goal is to run a 50/50 portfolio, half in big tech and half in domestic recovery names like banks, couriers, construction, housing, etc. The market will flip from one sector to the other. So as long as you have exposure in both you’ll have a portfolio that’s always going up. Their performance has gone up 95 days out of 100 because of this approach. He believes that any sell-offs will only be temporary and that we won’t see any big corrections until interest rates go back over 3%.

What key success principles has John Thomas followed over his decades of trading? He shares more in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet

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John’s investing strategy in new tech

John has lived in Silicon Valley for much of his life. He knew Steve Jobs, Steve Wozniak, and worked at Morgan Stanley with Jeff Bezos. He knew when these people came up with something it was real. Because of this, he got into Tesla really early. He’s constantly looking for the next big thing to invest in before it becomes the next big thing.

How does he find them? He notes that you need to have an understanding of the underlying technology to know if it will work or not and if there will be demand for it. He shares that the used car business is inefficient and ripe for disruption. Along came Carvana, moving the whole thing online at a fraction of the cost. When the iPhone came out, it was infinitely more capable than anything else on the market.

The goal is to look for category killers and destroyers. John spends $1 million on research a year just sorting out the scammers from the real deals. John avoids anything in the restaurant industry and in marijuana because the barrier to entry is so low.

Where might John put his money? John said CRISPR just made a huge deal to expand the use of gene editing. He also believes Palantir will be a great pick in the future. He’s a huge believer in Tesla, and we have a long discussion about its future in this episode. Don’t miss it!

What is John Thomas’s market timing index? Learn more about it in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet

Resources & People Mentioned

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