Video Intro - Trading in the 1980s, Today and Crucial Tips on Reducing Risk and Increasing Profits
Personal and Trading History
Paul Tudor Jones graduated from the University of Virginia with a degree in economics in 1976 and went on to work for Eli Tullis, a successful cotton trader on the New York Cotton Exchange. In 1980 the Tudor Investment Corporation was formed and he has had outstanding success trading multiple investment strategies across a wide variety of markets with one of his biggest calls was predicting Black Monday in 1987.
In the crash of 87, he made a huge profit holding short positions as the market fell and is thought to have made an estimated $100 million that year. He has been married since 1988 to his Australian wife Sonia, formerly a fashion model and the couple have four children.
Tudor Jones Trading Strategy
In terms of his general investment philosophy, he doesn't believe in taking big risks and never leverage's up substantially and generally looks for skewed reward-risk opportunities. By doing this, with small investments with great reward to risk, he gains the maximum gain for the minimum pain When greed or fear, skew the market price to far in either direction he gets ready to hit the trade.
The best money is made at the market turns of course (providing you can pick them) and as he says he has missed a lot of meat in the middle, but catches a lot of tops and bottoms and made huge gains. These trades offer the best risk to reward and his market timing is legendary.
The key to long term success is having sound money management. Jones believes that you need to play great defense first, not great offense. He Never average losers and decreases his position size when he is doing poorly and increases it, when he is trading well and making money. He is trading the least when he doing the worst and protecting equity which is the major consideration for him.
He has mental stops and if the stop is hit the trade the is liquidated. He not only uses price stops, but time stops, if a market has not moved in the time period he thinks it should, he will liquidate the trade. He monitors the whole portfolio equity and risk to it at all times, as the market changes so of course does the risk on all open positions.
Another key to being a great trader is not to have an ego, if you do you will become over confident and lose so its important to be humble and always think of the worst that can happen to your account first and stay grounded and humble.
Tudor Jones Quotes
“I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.”
“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have”
“You adapt, evolve, compete or die.”
Final Words
Paul Tudor Jones has an aggressive trading style and is one of the most famous contrarian traders and hist track record shows he is one of the best. Like all great traders he not concerned with gains first but losses and despite his aggressive style, strong money management keeps in the game, until he can hit the trades that others don't see coming. He hits his trades with great market timing, courage and discipline and is quite rightly, seen by many as one of the best traders of all time.
