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Market Wizards - Interviews with Top Traders

Paul Tudor Jones- The Art Of Aggressive Trading

Paul Tudor Jones is the manager of Tudor investment Corp which is a Hedge Fund. He came to the limelight when he predicted Black Monday, the worst performing day of the stock market in American history. Not only did he survive the crash of 20%, but he also thrived from it by securing a return of 62% that month.

 

He always focuses on risk control. He always thinks about losing money rather than about gaining it. He uses stop-loss, both with respect to the price of the security and time. For example, if he is long on a stock which is down by 10%, he would step out and if it doesn't move the way he is expecting, then after waiting for a certain time frame, he moves out again.

 

Another rule he follows is putting a stop on all trading activities if it reaches negative double digits in a single month. This risk control has helped him to time many of the turning points of the market.

 

He recalls how he lost 60-70% of his equity in a single trade in 1979 in the Cotton market. That's when he decided to become disciplined and business-like about trading. He always thinks of being short from the previous nights’ close.

 

He is a firm believer that one should reduce position sizing when you're cold in the market.

 

He also suggests keeping a firm check on your ego and self confidence. His biggest hits were only after his biggest victories when he started to believe that he knew something.

 

Paul attributes his success to the Elliott Wave approach and believes that the best money can be made only when the market turns. Rest of the time (85%) it only moves sideways. 

 

One of his greatest strengths is he doesn’t get emotionally involved with the market. If he made a mistake even 3 minutes back, he doesn’t care. Instead he focuses on what he is going to do next.

 

His advice to traders is not to focus on making money but to focus on protecting your initial capital.

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