Paul Tudor Jones
Turned $1.5 million into $300 million in five years
“That cotton trade was almost the deal breaker for me. It was at that point that I said, “Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”
I had to learn discipline and money management. I decided that I was going to become very disciplined and businesslike about my trading. I spend my day trying to make myself as happy and relaxed as I can be.
If I have positions going against me, I get right out; if they are going for me, I keep them. I am always thinking about losing money as opposed to making money. Risk control is the most important thing in trading. I keep cutting my position size down as I have losing trades. (more…)
Archives of “risk points” tag
rssWisdom From Bruce Kovner
On trading ranges and price patterns:
…as a trader who has seen a great deal and been in a lot of markets, there is nothing disconcerting to me about a price move out of a trading range that nobody understands.
…Tight congestions in which a breakout occurs for reasons that nobody understands are usually good risk/reward trades.
…The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts.
…The general rule is: the less observed, the better the trade.
On predetermined risk points:
Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis… I always put my stop behind some technical barrier.”
I never think about [stop vulnerability], because the point about a technical barrier — and I’ve studied the technical aspects of the market for a long time — is that the market shouldn’t go there if you are right. (more…)
Wisdom of Market Wizards
“Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay for the losers.” – Michael Marcus
“The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts.” –Bruce Kovner
My take – Most commons are pennants and flags. And most obvious failed outbreaks are candles ended with the close below the intended trendline.
“The most important rule is to play great defense, not great offense. Everyday I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.”
“… I believe the very best money is to be made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all the money by catching the trends in the middle. Well, for twelve years, I have often been missing the meat in the middle, but I have caught a lot of bottoms and tops. If you are a trend follower trying to catch the profits in the middle of a move, you have to use very wide stops. I’m not comfortable doing that. Also, markets trend only about 15% of the time; the rest of the time they move sideways.”
“Don’t focus on making money; focus on protecting what you have.”
–Paul Tudor Jones (Big Big Big Fund Manager)
“The most important is discipline – I am sure everyone tells you that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courafe to go into the market, and courage comes from adequate capitalization. Fifth, you need a strong desire to win.”
“You should have the attitude that if a trade loses, you can handle it without any problem and come back to do the next trade. You can’t let a losing trade get to you emotionally.” –
Gary Bielfeldt