Even by the wild-and-wooly standards of commodity futures trading, John W. Henry stands out as unusual. He attended five California colleges in the early 1970s without ever graduating. He devised a card-counting system for playing blackjack and dabbled in parapsychology. And he eventually applied the ideas of such thinkers as Carl Jung and J. Krishnamurti to choosing his own commodity trading strategy.  None of this has stopped Mr. Henry from becoming a superstar trader. Last year, Mr. Henry's biggest investment fund soared 62%. And thanks to his hefty share of investors' profits, Mr. Henry earned more than $50 million in 1991- a sum that Financial World magazine says ranked him as the sixth highest-paid person on Wall Street. The only certainty, he believes, is that trends tend to repeat themselves. And so do people's reactions to them - a notion he developed from the Indian philosopher J. Krishnamurti and the author William D. Gann.
    As Mr. Henry puts it, "Man is mechanical in certain scenarios." For example, he says, people who get slapped "tend to get upset." Mr. Henry is a trend-follower, making his money by leaping on market moves already in progress, with huge, leveraged bets on everything from soybeans to currencies.
    But for all his eccentricities, the 42-year-old Mr. Henry is all too typical of many big-time traders who  rack up a few years of spectacular returns, get showered with money by large Wall Street securities firms, and then suffer losses that stagger investors.
    This year, with more than $900 million under management, he had losses of as much as 45% by the middle of May after trends in currencies and international bonds turned suddenly and slammed his portfolios.
    Although Mr. Henry has since come back strongly, rebounding 22% in June and another 26% in July, he is still down 2% to 3% for the year. And Merrill Lynch & Co., which has poured more than $150 million of its clients' money into several of Mr. Henry's futures funds, plans to cut back his role in Merrill's commodity trading pools because of the severity of his trading losses this spring.
    Mr. Henry trades out of a three-story glass and stone office building nestled in a secluded, wooded glade on the Aspentuck River in Westport, a wealthy suburb an hour's drive from New York City. A round-the-clock trading staff is there to execute buy and sell orders in 70 commodity markets that spew from minicomputers programmed by Mr. Henry to spot market trends.
    Although he maintains a home in nearby New Canaan, Conn., Mr. Henry lives in Boca Raton, Florida, apparently for tax purposes, where he is building a new house near the local polo club.
    Threat of wearing Jester's Hat - Employees are reminded of his demanding and exacting attitude. In a window outside the trading room stands a multicolored jester's hat, which Mr. Henry brought back from Paris. "He threatened that if anyone made an error in trading, they would have to wear the hat for a day," says Kenneth Tropin, president of Mr. Henry's firm. The former top Dean Witter Reynolds Inc. futures executive was hired by Mr. Henry in 1989.

    Mr. Henry says he would not have been successful in financial markets "had it not been for my studies of psychology and philosophy." He adds, "If you don't understand yourself to some degree, it's difficult to make money," crediting such self-knowledge with helping him ride out market downturns.
    "What you're really pitted against in the market is your own self, how you react to what's going on in  the markets," he says. Unfortunately, he says, his penchant for intellectuals "paints a picture of a  money manager who's a weirdo. But at least, I was able to translate the search for what is not tangible into something tangible."
    Thin, pale and wraithlike, Mr. Henry prefers reading books to dealing with people. And he says some Wall Street brokers prefer that he stay away from clients because he describes the volatile ups and downs of his trading style so frankly. Indeed, his accounts have fallen by 35% or more on at least three occasions.
    In 1976, Mr. Henry was yanked into the commercial world after his father died and he began managing family farmland in Arkansas and Illinois. An early foray into hedging a soybean crop lured him into commodity trading, where he did so well that brokers in Memphis urged him to trade for other farmers as well. After studying 100 years of grain price trends, he devised a formula and began trading in 1981 from an office near his home in Newport Beach, Calif.
    The fund that catapulted Mr. Henry into the top ranks of traders, Financial and Metals Portfolio, has been sold heavily by several Wall Street firms since it reported price gains of 252% in 1987, 84% in 1990 and 62% in 1991. In the two years ending in December, the fund's assets multiplied tenfold to $619.2 million, or more than two-thirds of Mr. Henry's total managed assets of $906.8 million.
    However, Financial and Metals began 1987 with only $1.2 million under management. In a footnote to its annual report, Mr. Henry says that year's results were "inflated" by the timing of additions and withdrawals.
    Financial and Metals scored its sizzling 1991 returns mainly by selling the dollar short (selling borrowed dollars in hopes of profiting from a price decline) and owning French, German, and Japanese bonds. When the Federal Reserve lowered U.S. interest rates late in the year, the dollar fell, and foreign bonds soared - producing a 45% gain for the fund in December alone. However, those trends reversed sharply in early January, leading to the 45% decline.
    Mr. Henry says this year's huge drop wouldn't have occurred if it hadn't been preceded by the December runup. But the drop was keenly felt by newer investors as they "took it more seriously" because they hadn't experienced earlier drops in the fund, he says.
    One big securities firm, he says, cut the leverage - or efforts to boost returns by using borrowed money - on his accounts in half near the bottom of the decline, thereby missing out on half of the rebound.
    In addition to Merrill, Financial and Metals has also been sold to clients by several other brokerage firms, including Dean Witter Reynolds Inc., usually in commodity "pools" that divide their assets among different traders. Merrill has given Mr. Henry more money than any other trader.
    Fees in such pools are steep. Individual investors must pay Mr. Henry an annual management fee of 6% of assets; institutions and pools pay 4%. Brokers who sell the pools may get 6% in one-time commissions plus another 2% annually in "production credits." On top of that, Mr. Henry gets to keep 15% of profits. And investors may also have to pay as much as 10%.
    By comparison, investors in stock mutual funds pay fees totaling only about 1% annually. Mr. Tropin argues that Mr. Henry's fees are justified by the fact that he usually uses borrowing, or leverage, to control assets three to four times the amount under management.
    Merrill asked Mr. Henry to come in to discuss the reasons for his big losses. Unlike other traders who may fidget, fret or consider changing their trading system, Mr. Henry calmly explained what was  happening and expressed confidence that he would bounce back. He was assured of bouncing back after the springtime bloodbath.
    Still, Merrill doesn't plan to use Mr. Henry in the same proportion of its commodity trading pools in the future because the latest "drawdown," or loss, was his most severe in both size and length of time, according to one Wall Street executive.
    At Shearson Lehman Brothers Inc., managing director Charles Nastro says Shearson did "a lot of soul-searching" before deciding to continue using Mr. Henry as a trading adviser. He adds that Henry may be unsuitable for clients who don't "have the stomach" for big losses, or don't want to pay the high fees.
    But Dean Witter, which has put more than $150 million in clients' assets into Henry-run futures funds, is standing by Mr. Henry.

(* Please note: futures and options trading involves risk of loss and may not be suitable for everyone.)