Arguably one of the greatest traders of the past 30 years both for his annual returns, consistency, and returns versus draw downs. Taken from his interviews and quotes here are ten things I believe he would do in this market. (Of course this is just hypothetical and my opinion based on all that I have read and watched on how he trades).

  1. He would have bet against the EU nations coming together to  agree on a consensus, he would be itching and waiting to short the Euro, and European markets.
  2. He would be carefully managing his risk exposure in the volatile market and waiting for the right moment to trade with a high reward to risk opportunity.
  3. If he was wrong in a trade he would not add to it he would exit.
  4. He would not be predicting he would be reacting to the action in the market, searching for a top to short or a bottom reversal to go long.
  5. He would be trading his beliefs about what buyers and sellers would be doing, trading off fear, greed, and uncertainty.
  6. He would be long markets trending up and short markets trending down.
  7. Mr. Jones would be studying charts, looking for technical patterns based on historical prices.
  8. While planning his trades he would be studying the underlying fundamentals of the European zone and making plans to trade events that he believed would eventually happen.
  9. He would be holding for days or weeks at a time trying to catch a price trend.
  10. He would love the action!

 

Paul Tudor Jones On Risk Management:

“..at the end of the day, the most important thing is how good are you at risk control. Ninety-percent of any great trader is going to be the risk control.”*

“Every day I assume every position I have is wrong.”

“Losers average losers.” PTJ’s office wall

His Trading Psychology

“Where you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt.”

His thoughts on Risk versus Reward trade set ups:

“I’d say that my investment philosophy is that I don’t take a lot of risk, I look for opportunities with tremendously skewed reward-risk opportunities. Don’t ever let them get into your pocket – that means there’s no reason to leverage substantially. There’s no reason to take substantial amounts of financial risk ever, because you should always be able to find something where you can skew the reward risk relationship so greatly in your favor that you can take a variety of small investments with great reward risk opportunities that should give you minimum draw down pain and maximum upside opportunities.”*

His thoughts on getting an edge in your trading:

” The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge. Because I think there are certain situations where you can absolutely understand what motivates every buyer and seller and have a pretty good picture of what’s going to happen. And it just requires an enormous amount of grunt work and dedication to finding all possible bits of information.”*

How he trades:

“The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s? If it’s going up you’re supposed to be long it.”

“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.”

Technical analysis:  “Made well over half the money that I’ve made in my lifetime.”

Fundamental Analysis:  ” Made the rest.”

Market efficiency: “No such thing.”

Day Traders: “95% losers.”

Rarely seen Paul Tudor Jones interview from PBS in the Eighties.

*Quoted in any interview by Joel Ramin on January 13, 2000