Tudor Jones' Strategy: The King's Basic Techniques
Tudor Jones's biography still captivates many minds and hearts today, as he was the one who made money during periods of market panic and depression.
His investment fund was giving its investors 60 percent annual returns when most couldn't beat bank yields.
The life journey of this manager, who dropped out of school and devoted himself entirely to a career as a trader, simply cannot fail to amaze or motivate one to take action.
However, let's be honest, lyrics are lyrics, but a real trader should be interested not in the success story, but in what practical techniques he used that helped him achieve success.
So, in this article, you will learn the basic techniques and strategy used by the king of financial markets, Tudor Jones.
Practical tips and techniques used by Tudor Jones
If you study most of Jones's own statements, you might get the impression that he is a practically systemless trader, and his trading style is more reminiscent of improvisation based on the market situation.
Yes, this may surprise you, but Tudor Jones had an excellent understanding and feel for the crowd, and he was aided in this by the most basic technical analysis. So, let's examine his key principles and rules:
1) Never enter the middle of a trend
At first glance, this statement would seem to be simply absurd, since theoretically it is possible to grab a piece of the profit from a potential continuation of the trend.
However, in reality, what you call the middle of a trend is usually the last days of its life; moreover, it is most likely moving by inertia thanks to people like you, while major players are already adjusting to a completely different market direction.
The most interesting thing is that Tudor Jones repeatedly carried out similar operations and most of them always brought only losses.
2) You can’t make money on a trend-following position unless you’re at the bottom of the trend
Did you know that Tudor Jones's trading strategy was based on the fact that he did not try to enter the market, but looked for its reversal points?
Of course, this may seem illogical to many, since searching for a reversal point is in many ways similar to playing roulette, but the history of successful traders shows us that success comes only from knowing when a collapse or rise is about to begin.
Many traders have spent years understanding this, and Tudor Jones was one of them.
3) Entering the market with multiple orders
In today's environment, most risk management books and stock market resources teach traders to let go of their losses and trades.
Yes, a typical trader, having suffered a loss on a position, will, as a rule, reject this strategy signal and will be right in his own way.
Tudor Jones, unlike many, was able to repeatedly enter the market despite being stopped out, but he did so as long as the potential profit allowed him to buy back a series of losses.
By the way, this trader was never embarrassed by the fact that only 15 percent of his total trades were profitable, but this amount was enough to earn billions.
4) Large orders must be hidden
Did you know that most speculative traders on the stock market don't have a strategy in the classic sense, but instead build their trading process around major players, calculating their orders, and positioning themselves in front of them in the hopes of pushing the market along with the shark.
While these were previously isolated cases and market sharks could be seen in the open, after the crowd began to constantly hunt for their orders, trading efficiency began to decline significantly.
This is why Jones always split his orders into many smaller ones in such a way as not to arouse unnecessary suspicion on the part of the market.
5) There is always someone's interest behind extremes
Many traders, while trading, constantly discuss whether the defined support and resistance levels are strong or not.
Jones developed an excellent practice for himself: if he saw the formation of a new high or low followed by a rebound, it means that literally a few points away there are large orders and stop orders that the market will undoubtedly try to take.
6) A channel breakout should be worked out only if a retest has occurred
During the trading process, channels and price ranges were often used, and upon the breakout of these (a sign of a trend reversal), Tudor Jones opened positions.
However, he did not trade simply on a breakout of the price range, but only if the surge met with decent resistance and a rebound to the original breakout point.
Of course, Tudor Jones, as the largest investor, possessed information that everyone else did not. Nevertheless, he was a versatile manager, but one thing he always maintained was, of course, a balanced approach to risk.
