In the footsteps of the master of foreign exchange: Paul Tudor Jones
In October 1987, most investors in the world suffered heavy losses. In the same month, the Tudor Fund managed by Paul Tudor Jones had a 62% return. Jones' outstanding performance is consistent. He has maintained triple-digit growth for five consecutive years. At the end of 1992, the European monetary system suffered a crisis. Jones made more than one billion US dollars in the foreign exchange market within a few months. Jones started as an agent and started in 1976, earning more than $1 million in commissions the following year. Jones joined the New York Cotton Exchange as a live trader in 1980 and made tens of millions in a few years. Jones left the exchange in 1984 to create a Tudor fund, starting from 1.5 million. Four years later, every 1,000 dollars invested in his fund has increased to more than 1,700 dollars. By the end of 1992, the total Tudor Fund had grown to $6 billion. If it weren't for Jones to stop accepting new investments and start distributing profits at the end of 1987, then 6 billion would be absolutely unstoppable.
Jones' trading career has not been smooth sailing. In 1979, he had the courage for a while and bought too many orders at a time. As a result, he encountered a falling limit and lost two-thirds of his funds when he waited for a flat order to appear. He was extremely depressed, almost completely lost faith in himself, and almost changed his career. Since then, he has learned to control risks and follow principles.
Jones making orders every day is a new starting point, what he earned yesterday becomes the past, and today he starts from scratch. The maximum loss per month cannot exceed 10%. When things go smoothly, Jones can stay for more than ten months without losing money. Three-digit annual growth rates are commonplace for him. Because of the effective risk control, Jones's fund can still profit even if the analysis and judgment are wrong. At the beginning of 1992, Jones believed that the interest rate cuts in the United States had come to an end, interest rates in Europe would fall, and the narrowing of the interest rate differential between Europe and the United States would reverse the weak US dollar. The Tudor Fund, therefore, entered the market and bought a lot of dollars. It was relatively smooth at the beginning, and the dollar strengthened by a few hundred points. But soon, news of the US economic sluggishness spread frequently, and the US dollar fell sharply against European currencies until it hit the lowest price in history. Jones cut the order in time after discovering that the general situation was wrong, avoiding even more significant losses. At the same time, he patiently waited for the opportunity to recover from the loss. At the end of the year, there was a crisis in the European monetary system. The British pound, Italian lira, and other currencies fell sharply. Jones entered the market to sell foreign currencies and made hundreds of millions of dollars in one month.
Jones has some specific principles for placing orders: unequally increase demands. After a batch of orders entered the market, the market reversed to show that there might be a problem with the judgment. Although the average price of blindly added charges is slightly better, the newly added order will only be bad if the party asks the wrong question. Conversely, if you believe that Fang Wen is correct, but the price is not good enough, then you don't have to worry too much. Jones believes that it doesn't matter where the order is placed; the key is whether you are bullish or bearish on this day. Novice favorites Jones: Are you buying or selling? Jones believes that whether he is buying or selling should not affect the judgment of others on the market. Novices should also think independently. Another question is: Where did you start to buy? Jones believes that it has nothing to do with whether it is a profit or loss that day. The key is to judge the rise or fall.
Jones believes that the most important thing to do is defense rather than offense. Every day, he assumed that every order he entered was wrong and set the stop-loss position in advance so that he knew how much he would lose at most once. Jones advises all traders not to be aggressive, let alone conceited. Always doubt yourself, doubt your abilities, and never feel arrogant. You are finished when you float. This is not to say that you have no confidence in yourself, you must have faith, but it is enough. Jones said he became more and more afraid of this business because he knew how difficult it was to maintain his results. Every significant loss is often when I feel good about myself after doing some beautiful orders in a row.
Jones' order-making strategy is unique. He is unwilling to follow the trend, rarely follows the movement, and always likes to make money when the trend changes. He is himself the greatest opportunist. Once he finds such an opportunity, he will go to the bottom or throw the top. If you make a mistake, cut the order immediately and try again; often, you start to make a lot of money after a few tries. Many people in the market think that blindly finding the bottom or the top is dangerous, and it is best to make money in the middle. Jones has successfully captured many tops and bottoms for more than a decade. Jones's theory is that if the follower wants to make money in the middle, the stop-loss order must be set far away. Once he is forced to cut the order, the loss will be significant. Besides, the market is only strong in 15% of the cases, and the other time is going sideways. So he prefers to do two ends.
Jones felt that no one could manipulate the foreign exchange market. Most people have the illusion that major Wall Street players can control changes in market prices. Jones said that he could enter the need for a day, two, or even a week, especially if the timing is right; he will refuel after entering the market, which may create a particular illusion. Still, as soon as he stops buying, the market price will fall unless The market itself is robust. He made a vivid analogy: You can open the most beautiful summer clothing store in Alaska in the icy world, but no one buys it, and you will eventually go bankrupt. Jones also pays attention to the opinions of his colleagues, especially those with better records. If he agrees with them, he will do more if there is a significant disagreement. He waits and sees. Initially, he was optimistic about a particular currency and wanted to buy it, but he patiently waited when he learned that a specific expert was throwing it. When the market started to level off one day, the man said; I think it's time to go out, so he will enter the market and buy unique items. Jones most respected the "Elliott Wave" theory in terms of specific analysis methods. He believes that a large part of his success should be attributed to this cycle theory. The Elliott wave theory is an analytical method that uses the golden section method to estimate the market ups and downs cycle and is widely used in the stock and futures markets. Jones believes that the foreign exchange market is no exception. After the Elliott wave theory is thoroughly understood, it can help you find many low-risk and high-yield entry opportunities.
When it comes to the secret of success, Jones believes that his strength is detachment. Anything that has happened is in the past. What happened 3 seconds ago is irrelevant. The key is what to do next. Stay away from the market emotionally. If your previous opinions are wrong, you have to revise them in time. We must be open-minded and firm in confidence. Although he prefers to do both ends and look for a reversal, Duffing Fund also uses several computer trading systems to follow the trend, and the results are also excellent. But Jones believes that a good trader should make more money than a computer system because the human brain can be flexible and adapt to market changes and the differences between different markets more quickly.