Michael J. Burry was once a physician, then a hedge fund manager of Scion Capital from 2000 until 2008, before closing it to focus on his own personal investments and trades. Michael Burry was made famous by his portrayal in the movie 'The Big Short,' starring Christian Bale, based on Michael Lewis's book. Mr. Burry was one of the first people to recognize and profit big from the 2008-2009 subprime mortgage crisis.

Here are ten of the top trading and investing quotes that could be the most helpful for understanding his investing and trading process. Burry has been both a value investor in stocks and a trader in credit default swaps. It is always great to hear from people who made a fortune in the markets while the majority lost a lot of money. It takes genius to bet against the majority with the right timing.

"It is ludicrous to believe that asset bubbles can only be recognized in hindsight." - Michael Burry

Extreme market bubbles can be seen in real time by the distance of prices from any reasonable valuations or projections.

"If you are going to be a great investor, you have to fit the style to who you are." - Michael Burry

Your investing methodology has to fit your own belief system, personality, and risk tolerance, or you will not be able to stick with it during capital drawdowns.

"Sometimes markets err big time. Markets erred when they gave America Online the currency to buy Time Warner. They erred when they bet against George Soros and for the British pound. And they are erring right now by continuing to float along as if the most significant credit bubble history has ever seen does not exist. Opportunities are rare, and large opportunities on which one can put nearly unlimited capital to work at tremendous potential returns are even more rare. Selectively shorting the most problematic mortgage-backed securities in history today amounts to just such an opportunity." - Michael Burry

Michael Burry explained in real time that the mortgage market was wrong and that he was going to bet it would collapse. When the market is wrong, it will eventually show you by price moving back to reality.

"In essence, the stock market represents three separate categories of business. They are, adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value. The preference, always, would be to buy a long-term franchise at a substantial discount from growing intrinsic value." - Michael Burry

Buying the best companies for growth and earnings at a value price creates great risk/reward ratios and increases the probability of making money.

"However, if one has been playing the buy-and-hold game with quality securities, one has been exposed to a substantial amount of market risk because the valuations placed on these securities have implied overly rosy scenarios prone to popular revision in times of more realistic expectation. This is one of those times, but it is my feeling that the revisions have not been severe enough, the expectations not yet realistic enough. Hence, the world's best companies largely remain overpriced in the marketplace." - Michael Burry

The problem with buy-and-hold investing is that the stock market tends to revert to the mean. Prices always return to their true valuations, which causes significant drawdowns in capital because there is no exit strategy to lock in profits.

"My positioning with my investors was always, I need three to five years." - Michael Burry

Even the best investment and trading strategies need at least three to five years to play out. The short term can be random, but over the long term, over multiple market conditions, an edge will play out in your favor.

"Volatility does not determine risk." - Michael Burry

Your position sizing, stop loss, and time frame determine your risk not the volatility of price action.

"At one point, I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham but, rather, set out on his own path and ran money his way, by his own rules... I also immediately internalized the idea that no school could teach someone how to be a great investor." - Michael Burry

You can learn from investing and trading legends, but in the end, you have to create your own trading system that fits your beliefs about the market along with your own return goals and risk tolerance.

"It is a tenet of my investment style that, on the subject of common stock investment, maximizing the upside means first and foremost minimizing the downside. The deleterious effect of permanent capital loss on portfolio returns cannot be overstated." - Michael Burry

Your risk/reward ratio is one of the most important factors to consider before entering any position. It is more difficult to make money back than to lose it because of a reduced capital base. If you lose 20%, you must earn a 25% return to break even.

"Credit-default swaps remedied the problem of open-ended risk for me. If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it." - Michael Burry

Futures and option contracts can help with risk management by defining the risk in terms of the contract's cost while leaving the upside unlimited.

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