Trading Lessons From Paul Tudor Jones
This post features an interesting video from Informed Trades. The short video summarises some of the key lessons traders can learn from Paul Tudor Jones. Paul Tudor Jones is the legendary hedge fund manager and billionaire as featured in the “Market Wizards” book from Jack D. Schwager. As of March 2011, the net worth of Paul Tudor Jones was estimated at USD 3.3 billion by Forbes Magazine. He was ranked at 107th in the list of richest Americans. (Source Wikipedia).
Here are a few of the key points from this video and also gained from reading about Paul Tudor Jones.
- Paul Tudor Jones trades with a view to minimising risk and allowing winners to run. Never playing the “macho man” and always protecting capital first and foremost. Play with great defence and with less of a focus on what money can be made.
- The big money is made by trading the market turns.
- If you are in a losing position and you are uncomfortable holding it the solution is to get out…traders can always get back in to the markets later.
- Always question yourself and your trades. Never think that you understand everything and you are invincible.
- Always know where you will get out if a trade goes against you. Use a stop loss!
- Paul Tudor Jones says that, to a certain extent, in order to be a good trader you need to have a contrarian approach to the markets.
- Monitor overall equity risk in terms of correlated positions etc
- When markets experience volatility/range expansion, after a period trading in a narrow range, humans will often feel the need to fade the resulting strong trend that can follow. Range expansion scenarios often indicate the market is going to continue to move in the direction as determined by the expansion (inside day breakouts anyone?).