Aside from being a successful billionaire, Paul Tudor Jones likes to share his stories and inspire beginner traders to trade better.
Trading is not an easy job. It requires time, money, and dedication to generate considerable income in the long term. This is partly why many successful traders like to share their experiences with novice traders and dedicate their knowledge to developing the trading and investing industry. This includes making an investment company, becoming a consultant or commentator in various media, writing trading books, and more.
In the world of trading, the name Paul Tudor Jones must sound familiar. In 1980, the American billionaire founded his own hedge fund, Tudor Investment Corporation, headquartered in Stamford, Connecticut. Eight years later, he co-founded the Robin Hood Foundation, which focuses on reducing poverty in New York City. According to Forbes, his net worth is estimated at $7.3 billion as of August 2022.
Predicting the Black Monday Crash
The legendary Paul Tudor Jones became famous after he was able to accurately predict the stock market crash on October 19, 1987, also known as the "Black Monday". On that day, the global stock crash started in Hong Kong. It spread across Europe and finally hit the United States, causing the Dow Jones Industrial Average (DJIA) to drop by 508 points or 22.61% to 1738.74.
While the rest of Wall Street was unprepared for the crash, Jones managed to pull off one of the greatest trades in history. Following his success in 1987, a PBS documentary called "Trader: The Documentary" was released. It caused quite a stir in the trading world due to the revelation of Jones' risk management system in detail. Many people even considered it the "holy grail" strategy in stock trading.
Unfortunately, Paul Tudor Jones seemed to despise the documentary and demanded it to be taken out of circulation. He even bought up as many copies of the VHS version of the film as possible to prevent the public from getting it.
Trading Lessons You Won't Get from College
Paul Tudor Jones is often known as a part of the "Great Traders" or basically traders that are highly successful. Born in Memphis, Tennessee, back in 1954, he grew up wanting to be a famous boxer. After earning a bachelor's degree in economics from the University of Virginia in 1976, Jones worked as a stockbroker for a little while before starting trading with his own fund in 1980.
During the same period, Jones got accepted into Harvard Business School which he didn't attend because he thought he wouldn't learn anything there. Jones once said that it would be crazy if he continued to attend college. He believes that real trading knowledge is simply not taught in classrooms.
The former welterweight amateur boxing champion claimed that such a school doesn't teach the tricks of trading the stock market. Apparently, the piece of knowledge that he sought was not part of even the greatest business school courses out there.
Taking the advice from his cousin who was a cotton trader, Jones started following and learning from Eli Tullis, a well-known commodity trader in New Orleans. While working in the brokerage firm owned by Tullis, Jones also learned how to trade futures on cotton commodities on the New York Cotton Exchange.
He perceived that futures trading is very competitive and the players must be able to handle losses. There's no such thing as right or wrong when trading in any market because there's only emotion. If traders can't handle it, sooner or later they'll lose the trade.
Today, Tudor Investment Corporation, which is a part of the business corporation owned by Paul Tudor, is one of the largest asset management firms in the United States. Its activities revolve around trading and investing in various markets as well as conducting research.
One of the most impactful trading lessons that we can learn from Paul Tudor Jones is the idea that loss is inevitable in trading.
He said, "The most important rule is to play great defense, not great offense. Every day 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 drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out."
Did you know? Paul Tudor Jones was not the only prominent figure who succeed in taking advantage of Black Monday. Andrew Krieger had his own success story during the incident. That's why his experience is included in the most sensational forex millionaire stories.