There is value in analysing Steve Cohen’s trading style. For those of you in the game, Steve Cohen needs no introduction. The 62-year-old trader is a grandmaster of the game. Steve Cohen is a legendary trader with a net worth to match (13 billion USD, 2017) making him the third highest paid hedge-fund manager and the 72nd richest people in the world.
So here is what one interviewer learned analysing Steve Cohen’s trading style when he had the fortune of sitting alongside the legendary trader in his trading room.
“Steve Cohen is a legendary trader with a net worth to match (13 billion USD, 2017) making him the third highest paid hedge-fund manager and the 72nd richest people in the world”
Steve Cohen’s trading style of never short a new high or buy a new low is relevant today
US stock indexes continue to bust higher and the bears are getting squeezed.
If someone (usually it is a big player ) is bidding up stocks to a new high, or selling stocks to a new low don’t stand in the way of that momentum. Put another way, don’t trade against the trend, particularly if volumes are high as you are likely to get steam-rolled.
Someone knows something that you don’t. Playing the contrarian trade, going against the trend, in this case, usually will lead to heavy losses.
Steve Cohen waits for stocks to stop making new highs before he shorts. Conversely, Steve Cohen isn’t the first to buy stocks when they are making new lows. He waits for a steady platform and the escalator moves up before buying.
“Steve Cohen’s trading style of never short a new high or buy a new low is relevant today”
Steve Cohen’s trading style of never short a new high or buy a new low is about not being the first to make the charge
The foot soldiers making the first assault are the first in the line of fire, it is less risky to go in under tank cover. In other words, with breakouts this week in the S&P 500, NASDAQ and Russell 2000, we now have a US equity market that, in Steve Cohen’s eye at least, is “unshortable”
“The primary reason I am as fruitful as I am is that I’ve fabricated an amazing group” – Steve Cohen
Steve Cohen’s trading style is developed around assembling a group of talented people
“I’m not a solitary wolf. Numerous merchants get a kick out of the chance to battle their own fights. I like to get a great deal of support. The primary reason I am as fruitful as I am is that I’ve fabricated an amazing group” said Steve Cohen.
But what would happen “if you were exchanging a room all alone?”, asks the interviewer.
“I would at present be exceptionally beneficial, however, I wouldn’t work out quite as well. Its absolutely impossible I could cover a similar expansiveness of the market,” replied Steve Cohen.
Steve Cohen is not alone in relying on a great team.
Ray Dalio, self-made hedge fund billionaire wrote in Life Principles, “that asking others who are strong in areas where you are weak to help you is a great skill that you should develop no matter what… remember that you’re looking for the best answer”, wrote Ray Dalio founder of the world’s largest hedge fund Bridgewater.
“A ton, presumably no less than 50 percent” – Steve Cohen (when asked how much of what he does is gut feeling)
Steve Cohen’s trading style is more than half based on gut instincts.
“What amount of what you do is a gut feel?”, asks the interviewer.
“A ton, presumably no less than 50 percent” said Steve Cohen.
But there is also evidence too that Steve Cohen uses more than “gut instincts.” Indeed, the legendary trader was fined $1.8 billion for insider dealing , a slap on the wrist, after all, he made $8 billion doing the crime.