Paul Tudor Jones, famously credited with predicting and profiting from the 1987 crash, built his legacy on protecting capital and rigorous risk rules. He once said:
“The most important rule of trading is to play great defense, not great offense.” :contentReference[oaicite:1]{index=1}
📌 Core Principles
- Defend capital first: “If I have positions going against me, I get right out; if they are going for me, I keep them.” :contentReference[oaicite:2]{index=2}
- Risk no more than ~1% per trade: Ensures survival even in losing streaks. :contentReference[oaicite:3]{index=3}
- Pursue 5:1 reward-to-risk: “I’m looking for 5 : 1 risk/reward ... I can be wrong 80% of the time and still win.” :contentReference[oaicite:4]{index=4}
- Don’t average down: “Don’t ever average losers.” :contentReference[oaicite:5]{index=5}
- Don’t overtrade or show off: “Never play macho man...don’t ever feel you are very good.” :contentReference[oaicite:6]{index=6}
🧠 Psychological Insight
Jones underlined emotional resilience: “Trading is very competitive and you have to be able to handle getting your butt kicked.” :contentReference[oaicite:7]{index=7}
He believed mindset is as important as strategy—he famously hired Tony Robbins and trading psychologist Brett Steenbarger for his team. :contentReference[oaicite:8]{index=8}
🔍 Strategy Integration
- Macro + Technical: Combines central-bank data with classic tools like 200‑day MA, RSI, MACD, and volume. :contentReference[oaicite:9]{index=9}
- Event-driven agility: Avoids overexposure near major reports—views them as gambling. :contentReference[oaicite:10]{index=10}
💼 Why It Works
- Defensive structure preserves capital to capture major trends.
- Strict rules reduce emotional and behavioral errors.
- Targeted risk-to-reward means even a low win rate can be profitable.
- Macro-awareness offers edge over purely technical traders.