Continuing on the Paul Tudor Jones bonanza. A great Paul Tudor Jones interview was conducted in 2000. It is available at:
Here are the important lessons that you need to know:
Paul says that he is “the single most conservative investor on earth in the sense that I absolutely hate losing money.”
He says he likes the futures markets “because you can generally get liquid and be in cash in literally the space of a few minutes. So that always appealed to me because I could always be liquid very quickly if I wanted to.”
Paul Tudor Jones knows that he generally only wants to trade the liquid markets. Chances are he is not going to fall for the Iraqi Dinar Scam. He likes to find the best risk to reward ratio trades.
Paul then reveals his secret to success: “To have an indefatigable and undying and unquenchable thirst for information and knowledge.”
Sounds pretty good to me. Keep searching for the information that has truly generated order flow and moved the market in the past and what can move the market in the future.
Because I think there are certain situations where you can absolutely understand what motivates every buyer and seller and have a pretty good picture of what’s going to happen. And it just requires an enormous amount of grunt work and dedication to finding all possible bits of information.
The above is a VERY important quote. What he is describing is very important because I have noticed it in my own trading. There are certain times when you know what the market is thinking, you know how the market players are positioning, you know what will cause them to start initiating fresh positions, or liquidating en mass, you know what the market sensitivity levels of various participants to different pieces of macro data, and then you just have a high degree of certainty that you know what will happen. And yes, sometimes it can take an enormous amount of grunt work to find out all the bits of information and market sensitivity. All part of the order flow trader cycle.
Jones then compares the volatility in the stock market from January 2000 to soybeans in 76′ or 83′, and to the silver top in 1980.
Jones then comments on draw downs and his use of leverage. “Everything is a function of leverage, how much of a draw down are you willing to tolerate, how much leverage do you want to put on. When I was younger, I had much greater draw downs, much greater draw down frequency, much greater leverage. So again, I’m probably the exact same trader as I was 15 years ago, it’s just less risk, less return.”
Paul trashes Price to Earnings ratios a little bit and alludes to order flow trading. “at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s? If it’s going up you’re supposed to be long it.”
Also Paul Tudor Jones pays around $100,000 every year to have a Christmas Lights Display synchronized with a soundtrack at his home in Greenwich, CT. Check it out below.