Successful Trader Series: Paul Tudor Jones

Paul Tudor Jones (PTJ) was born in Memphis, Tennessee. He went to University of Virginia, earning an undergraduate degree in economics in 1976 as well as college welterweight boxing championship. In the same year, he started working on the trading floors as a clerk and later broker. Just before enrolling in Harvard Business School, he has been advised by his cousin to go and talk to commodity broker Eli Tullis ( commodity broker), who later mentored and hired him in trading cotton futures at the NYSE. Later in 1980, PTJ founded Tudor Invesment Corporation, which is today a leading asset management firm headquartered in Connecticut. The investment strategies of the Tudor Group consist of discretionary global macro, quantitative global macro (managed futures), discretionary equity long/short, quantitative equity market neutral and growth equity.
As reported in the market Wizards,this successful trader’s futures trading style and beliefs could be summarized as follows:
Swing Trader– the best money is made at the market turns.
Contrarian– attempting to buy/sell turning points as indicated above.
Keeps trying the single trade idea until he changes his mind fundamentally.
Otherwise, he keeps cutting his position size down (as opposed to the majority of the losing traders, who increase their size when they are losing).
PTJ trades the smallest amount when his trading is at its worst.
Spends his day making himself happy and relaxed.
Gets out of a losing position that is making him not comfortable.
The key with his trading strategy is to play a great defense and not a great offense.
Never averages losers. Increases his trading size only when he is profitable.
Mental Stops– PTJ always has mental stops. He uses not only price stops, but also time stops.
He believes price moves first and fundamentals come second.
Currently, Tudor Investment Corporation is estimated at about $12 billion. This successful trader made his fortune shorting the 1987 stock market crash. Jones was able to predict the multiplying effect that portfolio insurance would have on a bear market. Portfolio insurance, a popular risk management tool, involves buying index puts to lower one’s portfolio risk. Thus, in a bear market, more and more investors will choose to employ their put options and drive the market down even further. Jones’ bet paid off big: on Black Monday of 1987, he was able to triple his capital from his short positions.
Finally, I will finish off with a great citation from this extremely successful trader:
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 moment you do, you are dead.