This article is one in a series looking at Jack Schwager’s classic investment books. The goal is to study interviews with famous traders and apply their wisdom to daily fantasy sports.
As the subject of the 1987 PBS documentary Trader, Paul Tudor Jones was already famous in Wall Street circles when Market Wizards came out in 1989. He was known for his high-energy style of trading, which involved lots of yelling into the phone. In talking with Schwager, though, he’s more restrained, discussing topics like contrarian thinking, money management, and getting past his mistakes.
At the time of this interview, Jones was coming off of five straight years of triple-digit returns for his clients. With that track record, he was doing something right. Let’s see what DFS wisdom we can garner from this interview with a market wizard.
Think Like a Contrarian
By watching Eli, I learned that even though markets look their very best when they are setting new highs, that is often the best time to sell. He instilled in me the idea that, to some extent, to be a good trader, you have to be a contrarian.
At this point in the interview, Jones is discussing the things he learned from his mentor, Eli Tullis. The big takeaway here is this idea that the times when markets look their best are often the best times to sell. This contrarian perspective goes against our human nature, but being able to think independently is essential to being a good trader.
This same concept can be applied to DFS lineup construction. If the entire industry agrees on a particular player, there is often money to be made from consciously choosing to go in a different direction. Sometimes fading one highly-owned player is all it takes to create a drastically different and highly profitable lineup.
We can use the Trends tool to help identify contrarian plays. For instance, this simple trend highlights players with low ownership projections and positive projected Plus/Minus values:
This trend will help you not only focus on contrarian plays but also screen for players with the potential to add value to your lineups.
Discipline and Money Management
It was at that point that I said, “Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?” That was when I first decided I had to learn discipline and money management. It was a cathartic experience for me, in the sense that I went to the edge, questioned my very ability as a trader, and decided that I was not going to quit. I was determined to come back and fight. I decided that I was going to become very disciplined and businesslike about my trading.
Jones is talking about one of the big losses he suffered early in his career. That loss was the result of being too heavily invested in one trade, which convinced him to introduce discipline into his trading through strict money management. He suddenly became focused on playing great defense.
No matter how confident you feel, it is always important to remember that anything can happen in any given slate. Forces outside your control can have a devastating impact on your bankroll if you give them the opportunity and overleverage yourself.
In just the past year, two different NBA games have been canceled due to condensation on the court, and it’s not uncommon after lineup lock for news to break that a key player is taking the night off. These negative possibilities — and many others — exist with each slate in each sport.
By practicing proper money management and not overexposing yourself to any one slate or any one player in a slate, you can ward off big losses. Specifically, you can look at game logs in our Player Models to identify players who tend not to take games off, and you can also use Trends to find players in situations in which they tend not to experience reduced playing time. For instance, you could run a trend for NBA players with high projected floors, projected usage, and projected minutes:
By not investing too much and by targeting players with solid projections by the FantasyLabs NBA team, it’s easier to avoid bankroll destruction.
The Past is History
I think one of my strengths is that I view anything that has happened up to the present point in time as history. I really don’t care about the mistake I made three seconds ago in the market. What I care about is what I am going to do from the next moment on. I try to avoid any emotional attachment to a market. I avoid letting my trading opinions be influenced by comments I may have made on the record about a market.
Jones mentions that one of his greatest strengths is his ability to shake off his mistakes almost instantly. Whether we are talking about trading or DFS, everyone makes mistakes. Even pros, like Labs Co-Founders Jonathan Bales and Peter Jennings (CSURAM88). The key is to be able to recognize those mistakes for what they are and avoid letting them impact future decisions. Unfortunately, this is often easier said than done.
This issue comes up regularly in DFS when we try to avoid rostering a player who recently burned us even if he’s a good option in the current slate. Our inability to view past mistakes as history interferes with our ability to make logical and profitable decisions in the present.
In fact, focusing on players who have recently disappointed can be a huge advantage:
This trend highlights players who have logged a negative Plus/Minus over the past month but who are still projected for a positive Plus/Minus and at least 20 fantasy points in the upcoming slate. By definition, these guys who have burned a lot of people recently but are good candidates to bounce back.
He is known for being a high-energy trader, but Jones comes off as calm and introspective in his Market Wizards interview, at the end of which he points out that a trader’s top priority is to focus on protecting rather than making money. Using the Labs Tools is a great way to manage your DFS investments and maybe even become a DFS Market Wizard.
