Top 10 Trading Rules - Paul Tudor Jones

Updated: Aug 26

Paul Tudor Jones Trading Strategies & Rules

Paul Tudor Jones was born on September 28, 1954. He graduated in Economics from the University of Virginia where he also became a welterweight boxing champion! So not only is he beating the markets, he's beating up people at the same time.

Paul Tudor Jones started off his trading career by working for a commodity broker, here Eli Tulis hired Jones and trained him in for trading cotton futures on the New York Stock Exchange (NYSE). The funny thing is he actually got fired for sleeping at his desk after a night of partying lol!

Now Paul Tudor Jones has put that in the past and actually manages his own firm Tudor Investment Corporation managing over $7 billion in assets.

His strategy and style of trading in this firm focuses on being broad, diverse and including global macro trading which we do here at logikfx too! So, if you're interested in learning a similar trading style watch our free web class here. He also mentions that he includes some event-driven strategies and technical systems within his approach.

One of Jones best trades was during Black Monday in 1987. Here be predicted the short tripling his capital by selling the U.S stock markets, earning approximately $100 million!

Overall, Jones is an inspiring trader and fund manager with tonnes of experience under his belt and a strong investment approach following global macro fundamental trading.

Let's take a look at what people are interested in, his net worth!

Paul Tudor Jones Net worth

Overall we know Paul Tudor Jones is worth a lot of money. His net worth was predicted recently in 2019 to be around $5.3 billion by Forbes.

Comparing this to people around the world it would make him 7th highest earning hedge fund manager!

All I know is he was a boxer turn trader and now hedge fund manager philanthropist.

Paul Tudor Jones on Bitcoin Investment

A massive surprise in the finance community was big dog Paul Tudor Jones bought Bitcoin to potentially hedge against inflation in 2020. He mentioned to his clients that he sees it as gold in the 1970s.

This is a complete opposite of how other experienced investors see Bitcoin with many stating it has no value at all.

Paul Tudor Jones made a famous quote that:

"the best profit-maximising strategy is to own the fastest horse".

The interesting point Jones made about bitcoin was that he's nor a hard-money person or a crypto nut. He mentions that the digitization of currency is coming and COVID-19 is speeding this up.

He's not wrong too as China have started the race already by making a digital yuan as legal tender in China. It's currently being tested in four cities in China which are Shenzen, Suzhou, Xiongan and Chengdu. Even businesses like McDonald's and Starbucks there have required to take it on board.

Paul Tudor Jones quotes

"When I develop an idea, I pursues it from a very-low-risk standpoint until proven wrong repeatedly, or until I change viewpoint."

"I've missed a lot of meat in the middle, but catches a lot of tops and bottoms."

"Key is to play great defence, not great offence."

"Never average losers. Decreases trading size when doing poorly, increase when trading well."

"Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead."

Paul Tudor Jones Strategy & Rules

Stay consistent: "Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting your ass". This shows how Paul Tudor Jones puts a heavy importance on risk management and being able to trade another day. Don't set yourself unrealistic expectations and over leverage in the market, this will end up in a blown account.

Invest, this is not a get rich quick scheme. "If everyone spent 90% of their time on that, not 90% of the time on pie in the sky ideas on how much money they're going to make, then they will be incredibly successful investors". The typical retail trader is normally sold a dream of quitting their job and trading full time from anywhere! In reality it's not the get rich quick scheme you're looking for. Paul Tudor Jones specifically says if people spent 90% more time on actual investing and trading rather than how much money they think they could make then they'd be on their way to being a great investor. Simply put, stop dreaming and start doing.

Know your maximum risk: "The most important rule is to play great defense, not great offence. Everyday I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so i can define my maximum draw down".

This is incredibly important for the typical trader to pick up. Everyone has different pain thresholds and risk appetites, but what you always want to be doing is protecting your capital. This means making sure you're setting stop losses at points where the trade idea is no longer valid and planning out the maximum risk you can put on a single position.

If in doubt, get out: "If you have a losing position that is making you uncomfortable, the solution is simple. Get out, because you can always get back in."

Many traders out there are always wishing on prices to reach their take profit, even when the price starts moving towards your stop. Paul Tudor Jones specifically mentions if its making you uncomfortable then get out. A nice tip you could do to soften losses is to reduce your position size partially as it moves to your stop loss, this way you reduce the overall loss but you can still stay in the trade. Additionally, following a systematic approach will heavily reduce the emotions in your trading.

Do your homework and know your edge. "It is not that we had any unfair knowledge, it is just we did our homework. People just don't want to believe that anyone can break away from the crowd and rise above mediocrity"

Do you know if your approach actually has an edge? To tackle this issue make sure to historically test your strategy and any methods to see if it worked in the past, the more data the better. Different market conditions can heavily affect how well your strategy can perform.

Trade turning points for the best risk to reward: "Everyone says you get killed trying to pick tops and bottoms.. well I have been missing the meat in the middle but i have made a lot of money at tops and bottoms".

Many Hedge Fund Managers actually trade turning points rather than trend trading which follows the crowd. But, how do you know when a turning point will be? The simple answer is that most traders are told a lie that technical analysis alone can help forecast turning points. In reality, that's not how the market works. To increase your odds of turning points you need to incorporate, fundamentals, technical and an overall picture of the market to see if it's truly oversold or overbought.

Trade high volatility and breakouts: "When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion".

Most traders out there only stick to the major currency pairs, also known as the most liquid pairs. What does this mean? It means they're also the least volatile currencies. So they don't move as much as others. Paul Tudor Jones specifically mentions to trade high volatility, to work out the volatility you can use methods such as the ATR and work out a trade-able set of currency pairs based on volatility.

Always be humble: "Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead".

Staying humble and knowing the market gives you opportunities not the other way round is key to waiting for higher odds trades. If you start to think you're a market wizard and can predict every move, you're going to end up over trading, over confident and unrealistic. All leading to a loss in capital and confidence.

Always be alert to what can go wrong. "I know that to be successful, i have to be frightened. My biggest hits have always come after i have had a great period and i started to think that i knew something".

Winning streaks feel great, but they're the worst mental state to be in. Euphoric trading can get you killed. Paul Tudor Jones mentions the key to keeping a healthy mindset is to always be alert and never think trades are going to work as his worst losses have come straight after winning phases.

Always adapt: "Markets are always changing, you adapt, evolve, compete or die".

Strategies will always have their ups and downs. But the key to consistent growth in the market is to always adapt your strategy. The markets conditions are always changing, so knowing when your strategy performs well and when it doesn't is important to understand.

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