The fund made about 125.9% in 1987
The commonly reported after-fee figure, including on Wikipedia and in financial media, hailed as one of the legendary performances of the era
Famous Traders · Global Macro
Paul Tudor Jones
Paul Tudor Jones / The man who was ready before Black Monday
From the cotton pit in New Orleans to founder of Tudor Investment, famous for the 1987 crash. His success didn’t come from guessing right but from strict risk rules. This page lets you compare the 1929 and 1987 charts, test the 5:1 rule and see how the 200-day line can protect a portfolio
WALL STREET · MONDAY
DOW PLUNGES 508 POINTS
−22.6% · worst day on record
Monthly Dow Jones, 1987 (approximate) · mock newspaper page
Born1954
Fund founded1980
1987 return≈ 125.9%
Risk rule5 : 1
THE CALL1987Positioned for the downside before the Black Monday crash and ended the year up about 125.9%
THE RULE5 : 1Risk 1 to aim for 5, so you can be wrong often and the portfolio still survives
THE LINE200 daysThe moving average he uses to tell which side the market is on, and when to back off
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ProfileQuick facts
Full namePaul Tudor Jones II
NationalityAmerican, born in Memphis, Tennessee
Born28 September 1954
EducationBA in Economics, University of Virginia, 1976, and a university welterweight boxing champion
FundTudor Investment Corporation, founded 1980
StyleGlobal Macro: trading futures, indices, bonds, currencies and commodities, with risk control before profit
Best known forIn 1987 the fund reported a return of about 125.9% after fees, the year US stocks suffered Black Monday
Beyond the marketCo-founded the Robin Hood Foundation in 1988, an anti-poverty organisation in New York
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Early lifeFrom the cotton pit to fund founder
Paul Tudor Jones was born in 1954 in Memphis, a city whose economy ran on cotton. After graduating in economics from the University of Virginia in 1976, he trained under Eli Tullis, a legendary cotton trader in New Orleans
In Market Wizards he says that early on he lost heavily trading cotton and almost quit. That lesson became the foundation of the philosophy he has stressed ever since: protecting against risk comes before making profits
DATELINE · 1954–2020Tap each headline to read the details
Born 28 Sep 1954 in Memphis, Tennessee, America’s cotton trading hub
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Paul Tudor Jones’s thinkingDon’t focus on making money; focus on protecting what you have
Paraphrased from his interview in MONEY Master the Game, not a direct quote
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The 1929 analogLab: comparing the 1929 and 1987 charts
In the 1987 documentary Trader, he and his research team overlaid the market chart of the time on the chart before the 1929 crash and saw a similar pattern. Slide the 1987 line back and forth to see how well the two periods line up, then reveal what happened after the peak
DJIA · approximate monthly values · peak = 0%Year one → year two ②
1928–19291986–1987
Correlation before the peak—
Figures are approximate, rounded month-end Dow Jones values used to illustrate the idea, not real daily data. Comparing with past charts (analogs) risks picking only the periods that fit our beliefs, so always use it with risk control
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Crash weekCrash week: the front pages, 14–20 Oct 1987
Black Monday didn’t come out of nowhere. The market had been signalling weakness for days. Tap each day to read that day’s front page
14 Oct 1987 · DJIA
−95 points −3.8%
The market began to fall after a worse-than-expected US trade deficit and news of a plan to tax takeover deals
15 Oct 1987 · DJIA
−58 points −2.4%
Selling continued as worries about rising rates and the dollar weighed on the market
16 Oct 1987 · DJIA
−108 points −4.6%
The Dow fell more than 100 points in a day, one of the first times in that era, ending the week in panic
19 Oct 1987 · DJIA
−508 points −22.6%
BLACK MONDAY: the Dow fell about 508 points, or 22.6%, in a single day, the biggest percentage drop in history. Trading systems and portfolio insurance programs accelerated the selling
20 Oct 1987 · DJIA
+102 points +5.9%
The Fed announced it stood ready to provide liquidity to the financial system and the market bounced. The lesson: markets after a crash swing hard both ways
Dow Jones figures are approximate and rounded, as commonly reported. Paul Tudor Jones’s fund had positioned for the downside before that day; the full details of its positions have never been disclosed
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Five to oneThe 5:1 rule lab: you can be wrong often if you lose little and win big
He says he enters trades when he sees the expected profit worth about 5 times the risk. Adjust the ratio, the win rate and the risk per trade, then see a hypothetical portfolio after 100 trades
Break-even win rate—
Expectancy per trade—
Account after 100 trades—
Maximum drawdown—
Wins and losses in the lab are spread evenly by the win rate, with no randomness. In reality you may lose many more times in a row. Spread, commission and slippage aren’t included, and a 5:1 ratio isn’t available every time in real markets
MARKET NOTICE · REBATEThe professional’s first rule: control costsTrade with XM account through 1TRADER and get up to 90% of the IB commission on every lot
Open account ↗1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
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The 200-day ruleThe 200-day line: back off when price breaks below
He says his main yardstick for every asset is the 200-day moving average of closing prices. If price is below the line, be careful and reduce risk. Compare buy-and-hold with holding only when price is above the line, on a made-up price chart
Made-up prices · 1,000 days of daily dataShaded areas = price below the 200-day line (in cash)
Price The 200-day line Beyond the market
Total return—
Maximum drawdown—
Time in the market—
This chart uses made-up data to illustrate the idea and doesn’t mean the rule will give the same results in real markets. In sideways markets, switching in and out on the line can cost you and lead to many small losses
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Fact checkFact check: truth and legend
Legendary reputations often come with exaggerated stories. We sort each by the weight of the evidence
He predicted the crash in advance
The documentary Trader shows him and his team comparing charts with the 1929 era and preparing for it, but positioning for a risk isn’t the same as knowing the exact date and time
About $100 million profit from Black Monday
An estimate reported by the media. No daily financial statements were published, so treat it as approximate
The documentary Trader disappeared from circulation
He reportedly didn’t want the documentary shown again, making it hard to watch officially. He has never confirmed the real reason in detail
Holding bitcoin as an inflation hedge
He wrote about it in his May 2020 letter The Great Monetary Inflation, and said in interviews that he held a small share of his portfolio
He has never had a losing year
Market Wizards (1989) records no losing years in his early career, but that only covers data to the late 1980s. The claim that he never lost in his whole life has no official source, and the fund itself went through weak performance and outflows around 2015–2016
He only uses technical charts
He uses macroeconomics, monetary policy and charts. The 200-day line is a risk-control tool, not the whole system
MAIN EVENT · 12 ROUNDSYOU vs COSTS
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LessonsLessons for Forex and gold traders
Your checklist
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Risk 1 to aim for 5
Before trading gold or a currency pair, set your stop loss and profit target first. If the target isn’t several times further than the stop, you don’t need to enter. At 5:1, even if you’re wrong 80% of the time you still profit before costs
Defence before offence
He says he thinks about losing money more than making it. When your account is down, reduce your order size, don’t increase it to win it back
The 200-day line shows the side
Gold or a currency pair below the 200-day moving average is a warning for the buy side. Use it as a filter for which direction to trade, rather than as an entry point
Don’t average a loser
Adding to a losing trade is a trap that has destroyed many accounts. If the market proves you wrong, get out first; you can always get back in
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Quiz5-question quiz
Question 1 / 5
In 1987, what return did Paul Tudor Jones’s fund make?
According to commonly reported figures, after fees
With a 5:1 reward-to-risk ratio, what win rate do you need to break even (excluding costs)?
1 ÷ (1 + 5) ≈ 16.7%: you can be wrong about 83% of the time and still break even
On Black Monday, 19 Oct 1987, about how far did the Dow fall?
About 508 points, or 22.6%, in a single day
How does he use the 200-day moving average?
As a trend filter and a defensive tool
How does he view averaging down on a losing trade?
The phrase “Losers average losers” is often quoted as a rule he lives by
0/5
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Trade like PTJFollow in Paul Tudor Jones’s footsteps: defence first, pick the setups worth taking
What you can use right away is risk discipline: set your stop before entering, choose setups that are worth it, and know which side the market is on. Here are tools on 1TRADER that help
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Further readingFurther reading
- Market WizardsJack D. Schwager · 1989An interview after the 1987 crash covering the cotton pit, his big loss as a young man and his philosophy of risk protection
- MONEY Master the GameTony Robbins · 2014An interview where he talks about the 5:1 ratio and the 200-day moving average
- Trader (PBS documentary)Michael Glyn · 1987An hour-long documentary from before Black Monday that became legendary because it’s almost impossible to watch officially
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FAQFrequently asked questions
What did Paul Tudor Jones do in the 1987 crash?
As commonly reported, he and his team compared the 1987 market chart with the period before the 1929 crash and positioned for the downside in advance. When the Dow fell 22.6% on 19 Oct 1987, his fund ended the year up about 125.9% after fees
What is the 5:1 rule?
Choosing only trades where the target profit is about 5 times the risk, such as risking $1 to aim for $5. That means winning only about 17% of the time still breaks even before costs
How is the 200-day moving average used?
He says he uses it as his main yardstick for whether an asset is in an uptrend or downtrend. If price breaks below the line, be careful and reduce risk. It’s a defensive tool more than an entry tool
Why is the documentary Trader hard to find?
He reportedly didn’t want it shown again afterwards, so most copies seen online aren’t official releases
How can his ideas be used with Forex and gold?
Always set a stop loss before entering, size your orders so the risk is no more than 1–2% per trade, choose only setups where the profit target is several times further than the stop, and use the 200-day line to decide whether to favour buys or sells
Educational content, not investment advice. Return figures are publicly reported figures. The comparison chart uses approximate monthly values and the labs use made-up data. · risk disclosure · Forex glossary