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Trading Education Posted by Team Topstep September 5, 2017

7 Rules Legendary Trader Paul Tudor Jones Lives By


Paul Tudor Jones is one of the most aggressive and legendary futures traders of the modern era. His first money management fund, Tudor Futures Fund, went from managing $1 million at launch in 1984 to more than $330 million four years later – the result of stellar performance that led to new money pouring in. As a result, he’s amassed a fortune of nearly $5 billion.

Recently, while re-reading Jack Schwager’s original Market Wizards, I was struck by Paul Tudor Jones’ seven rules for trading. And while Jones often entered positions for weeks or months at a time, there is a lot that day traders can learn from his approach. Here they are – how many do you follow?

  1. “Don’t average losers.”
  2. “Decrease your trading volume when you are trading poorly; increase your volume when you are trading well.” (This is why we have the scaling plan in the Funded Account® and Funded Trader Preparation™.)
  3. “Never trade in situations where you don’t have control.” Jones elaborated that he doesn’t “risk significant amounts of money in front of key reports, since that is gambling, not trading.” (Also why our traders are flat markets for a minute heading into and out of key economic reports.)
  4. “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.”
  5. ” Don’t be too concerned about where you got into a position.”
  6. “Play great defense, not great offense. Every day I assume every position I have is wrong.”
  7. Stay humble. “If you make a good trade, don’t think it is because you have some uncanny foresight.”

But lest you think all this came easy to Jones, Market Wizards also details how he nearly quit the business following one ill-timed cotton trade in 1979. After that, he notes that he was so depressed that he “nearly quit” before he came upon the following revelation: “Why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”

Well said.