"The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge."

"Don't focus on making money; focus on protecting what you have."

"I look for opportunities with tremendously skewed reward-risk opportunities. Don't ever let them get away."

"The most important rule of trading is to play great defense, not great offense."

"Failure is a great teacher, and, if you're open to it, every mistake has a lesson to offer."

Active Era

1980s – Present

Net Worth / AUM

~$7.5 Billion

Avg Annual Return

~19.5% (net, over 30+ years)

Max Drawdown

~13% (one of the lowest in macro trading)

Markets

Equities, Bonds, Currencies, Commodities

Biography

Paul Tudor Jones II is one of the most respected and feared traders on Wall Street. He founded **Tudor Investment Corp** in 1980, which has grown into a multi-billion dollar hedge fund powerhouse. His most legendary trade came during the **1987 Black Monday crash** — while the Dow Jones plummeted 22.6% in a single day (the worst single-day crash in history), Jones had positioned massive short positions weeks in advance. He reportedly **tripled his money** that day, earning an estimated **$100 million** in a single session. His success wasn't luck — he spent weeks studying the parallels between 1987 and the 1929 crash using technical analysis overlay charts. His documentary 'Trader,' filmed in 1987, has become a cult classic that he later tried to suppress. Jones has maintained an annualized return of ~19.5% net of fees for over three decades with remarkably low volatility — a consistency that few macro traders have ever matched. He is also a major philanthropist, founding the Robin Hood Foundation.

Strategy Deep Dive

Jones is a discretionary macro trader who combines top-down economic analysis with precise technical timing. His approach has several distinct layers: 1. The Macro Thesis — Top-Down Analysis: Jones starts by identifying major macroeconomic imbalances — interest rate differentials, central bank policy shifts, inflation trends, geopolitical events. He looks for situations where the market hasn't yet priced in a major shift. He calls these "asymmetric opportunities" — where the potential payoff vastly exceeds the risk. 2. The 200-Day Moving Average Filter: Jones famously uses the 200-day moving average as his primary trend filter. He stated: "My metric for everything I look at is the 200-day moving average of closing prices. I've seen too many things go to zero. I've seen whole trading floors of friends of mine wiped out." If an asset is below its 200-day MA, he's cautious on longs. If above, he's cautious on shorts. 3. Gradual Position Building — The Probe Method: Jones NEVER enters a full position at once. He starts with a small "probe" trade (typically 10-25% of his intended full size). If the market confirms his thesis, he adds a second layer. Then a third. He might take weeks to build his full position. This approach means: - If he's wrong early, the loss is tiny - If he's right, he has time to build maximum exposure - He maintains flexibility to change his mind at any stage 4. The 5:1 Rule: Jones only takes trades where he sees at least a 5:1 reward-to-risk ratio. If he can't identify a trade with at least $5 of potential profit for every $1 of risk, he passes. This extreme selectivity means he takes fewer trades but with much higher conviction. 5. Aggressive Loss Cutting: Jones is famous for cutting losses faster than almost any other trader. He has said: "I'm always thinking about losing money as opposed to making money. Don't focus on making money; focus on protecting what you have." His stops are pre-defined and non-negotiable.

Real Trade Example

Black Monday 1987 — The Greatest Single-Day Trade in History

Setup & Context

Jones noticed striking parallels between 1987's market structure and the 1929 pre-crash pattern. The S&P 500 had rallied 40% in 1987 with extreme speculation, portfolio insurance was creating a feedback loop, and the 200-day MA was flattening.

Entry Layers

S&P 500 ~310Small probe short (10% size)

Initial divergence between price and breadth — market narrow and vulnerable

S&P 500 ~305Added short (+20% size)

Market broke below key support with rising volume — thesis strengthening

S&P 500 ~295Added heavily (+40% size)

200-day MA broken — massive sell signal. Portfolio insurance cascade beginning

S&P 500 ~280Full position (remaining 30%)

Friday before Black Monday — panic was accelerating, no buyers remaining

Stop Loss

Initial stop above the recent highs at S&P 320. As position built lower, stop moved to breakeven on early entries.

Outcome

On October 19, 1987 (Black Monday), the Dow fell 22.6%. Jones's S&P short positions generated an estimated $100 million in a single day. Tudor Fund returned 125.9% for the year after the crash, while most funds were deeply negative.

Key Lesson

Jones's gradual position building was critical. His early probe losses when the market was still going up were tiny. But when the crash came, he had built a massive short position at progressively better levels. The scaling approach protected him if wrong and maximized profits when right.

Risk Management Rules

Max Position Risk

Never risk more than 1-2% of fund on initial probe

Reward/Risk Minimum

Only take trades with 5:1 or better reward-to-risk ratio

200-Day MA Rule

Don't go long below the 200-day MA; don't short above it

Scaling Schedule

Build positions in 3-5 layers: 10-25% → 25% → 25% → 25%

Maximum Loss Rule

If down 10% in a month, cut all positions by 50% and reassess

Conviction Scale

Position size directly proportional to confidence level (1-10 scale)

Key Trading Principles

Start small with a probe position (10-25% of intended size) — add only as the market confirms

Always define your exact risk before entering — know where you're wrong and place your stop there

Focus on risk/reward asymmetry — only take 5:1 minimum reward-to-risk trades

Use the 200-day moving average as your primary trend and danger filter on every asset

Capital preservation is the absolute #1 priority — defense wins championships

Stay intellectually flexible — be willing to reverse your entire position if the facts change

Study history obsessively — market patterns repeat because human psychology doesn't change

The best trades feel uncomfortable — if it's obvious, it's already priced in

How SherAlgo Implements Tudor's Philosophy

SherAlgo enables Jones's probe-and-scale methodology through its multi-order placement — you can pre-set multiple entry levels with different lot sizes to mimic his gradual position building. The last order scaling feature (scaling the last 25% by 4x) mirrors his approach of adding more aggressively as conviction grows. SherAlgo's TP/SL management across all positions lets you define risk exactly as Jones demands. And the EMA 200 overlay in the panel gives you Jones's primary trend filter directly on your chart.

Paul Tudor Jones