October 19th, 1987. The day we all got to know as Black Monday. This was a staggering month for nearly everyone engaged in the stock market however not for Paul Tudor Jones. This guy managed to make one of his best trades in that week. Paul Tudor Jones, known as the man who shorted the “Black Monday 1987” crisis, is one of the most well-known and respected traders of our time.
He is eminent for his aggressive trading styles and is a standout amongst the most famous contrarian traders alive today. He is the founder of Tudor Investment Corporation, a hedge fund that is a prestigious money management firm for people all over the world. With his acumen of hitting trades with great market timing, combined with courage and discipline, he has managed to amass quite a fortune. As of 2018, the net worth of Paul Tudor Jones stands tall at $4.5 billion.
Strategies & Tactics:
Jones always emphasizes that traders, especially rookie, should always play defensive and not has an offensive strategy. The well-known expression, “If you fail to prepare then prepare to fail”, is what Jones believes in. He firmly trusts that racing into the market without a sound arrangement can be extremely unsafe and cataclysmic.
Jones is known for his contrarian methods of buying and selling turning points. He trades in one particular direction until the fundamentals suggest otherwise. His macro trading style is based primarily on technical analysis, with a lot of emphasis on momentum indicators.
Jones’s Philosophy:
- Don’t be a hero. Don’t let Ego get the better half of you. The moment you become a narcissist, you are dead in this unpredictable and highly volatile market.
- The most important rule of trading is Defence and not Offense. The biggest mistake a rookie make is that he is always anxious to trade and keeps looking for a trade to enter. This offensive attitude can bring little profits initially but for a long run isn’t healthy.
- When trading poorly, keep reducing the position size so that you’re not risking too much. There is no reason to lose more when you’re not at your best game or market is going against you.
Black Monday, October 1987:
October 19th, 1987 is known as ‘Black Monday’ due to the crash of global stock markets. It affected both the traders and investors gravely. However, Jones anticipated the crash of Black Monday. He tripled his money by holding large short positions. So, while the world around him crashed and burned, he managed to make a profit of 62% by holding on to short positions. That year, he made a profit of $100 million. The accomplishment earned him the name of “The man who shorted the Black Monday 1987 crisis”.
There is a great deal to learn from someone like Jones. His patience and calculated technique are worth understanding and learning. A role model like him for new traders will surely be enlightening for them.