Paul Tudor Jones' Trading Rules: 'Never Trade In Situations Where You Don't Have Control'

Billionaire investor and founder of Tudor Investment Corp. Paul Tudor Jones divulged his top seven trading rules during a 2020 interview.

What Happened: Jones emphasized the importance of safeguarding one’s assets over making profits. This principle was borne out of a costly mistake early in his career when a risky cotton trade led to a 60 to 70% loss for the accounts he managed.

Back in 2020, in Jack D. Schwager’s “Market Wizards“, Jones shared his strategy, leading to his subsequent success in the market. His trading rules are a distillation of his experiences and risk management tactics.

Here are the seven trading rules Jones swears by:

“Don’t ever average losers.”

“Decrease your trading volume when you are trading poorly; increase your volume when you are trading well.”

“Never trade in situations where you don’t have control.”

“If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.”

Also Read: Peter Lynch’s Timeless Advice: ‘When the Market’s Going Down and You Buy Funds Wisely, at Some Point in the Future You Will Be Happy’

“Don’t be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the position that day. Always think of your entry point as last night’s close.”

“The most important rule of trading is to play great defense, not great offense. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown.”

“Don’t be a hero. Don’t have an ego. Always question yourself and your ability.”

Why It Matters: Jones’ trading rules are not just a reflection of his personal journey in the investment world, but also serve as valuable advice for traders at all levels. His emphasis on risk control and humility in trading resonates with the challenges faced by many in the volatile world of investment.

These rules, derived from hard-earned experience, could potentially guide traders in making informed decisions and avoiding costly mistakes.

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