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Paul Tudor Jones and Black Monday: defense first

In 1987, a film crew followed a 33-year-old trader around his office. On camera, he and his team compared that year's market to the one before the 1929 crash. In October, the market fell 22.6% in a single day, and Paul Tudor Jones was ready.

Story · 7-minute read · Updated 2026-10-21

Who they were

Paul Tudor Jones II was born in Memphis, Tennessee, in 1954. He studied economics at the University of Virginia and graduated in 1976.

He learned to trade on the cotton floor in New Orleans, working for a well-known cotton trader named Eli Tullis. It was loud, fast and unforgiving. You learned to take a loss quickly or you didn't last.

In 1980 he started his own firm, Tudor Investment Corporation.

What happened

The 1987 documentary

In 1987, a public TV documentary called Trader followed Jones through his days. It showed his routines, his team, and his focus on risk.

In the film, Jones and his colleague Peter Borish talk about how the 1987 market looked like the market of the late 1920s. Borish had laid one chart over the other. Jones has since credited Borish with that work.

Black Monday

On October 19, 1987, the Dow Jones Industrial Average fell 22.6% in one day. It's still the biggest one-day percentage drop in its history. The day became known as Black Monday.

Jones had positioned for a fall. His fund had a huge year. Wikipedia and many profiles put its 1987 return at about 126% after fees. Other sources say it gained about 62% in October alone. The figures likely measure different things, so treat the exact number with care.

After 1987

His firm grew into one of the best-known names in macro trading: betting on big moves in currencies, rates, stocks and commodities based on the economy. In 1988 he also started the Robin Hood Foundation, a charity fighting poverty in New York City.

The moment everyone remembers

The famous image is the young trader on camera, calling a crash before it happened.

But traders who study him point to something else: how much of his talk is about losing. In Jack Schwager's 1989 book Market Wizards, he describes thinking about what he could lose before thinking about what he could win.

A line often attributed to him says the same thing in a few words: "Don't focus on making money; focus on protecting what you have."

What it teaches

1. Plan the loss first

His rules start with defense. Before a trade, know where you'll be wrong and how much it costs. That's the job of a stop loss.

Then size the trade so that loss is small, about 1% of the account. The position size calculator does this from your stop.

2. Look for trades where the win is bigger than the loss

Jones has said in interviews that he looks for trades where the possible gain is several times the possible loss.

That's the risk-reward ratio. If you risk 1 unit to aim for 3 units, you can be wrong more often than right and still come out ahead on paper. A math example, not a promise. Losses are always possible, and the expectancy calculator shows how win rate and reward work together.

3. Don't add to a loser

"Losers average losers" is a phrase often linked to him. It means: if a trade is going against you, don't buy more to lower your average price. You're making a losing trade bigger.

This is the same trap behind revenge trading. One fixed loss is fine. A loss you keep adding to is how small problems grow.

4. Use a simple filter for the big picture

Jones has said he watches the 200-day Moving average, the average closing price of the last 200 days. Roughly: when price is below it, he is more careful.

You don't need his exact line. The idea is to check the bigger picture first and trade with it. Our version is reading the bigger chart before the smaller one, explained in multiple timeframe analysis. For the moving average itself, see moving averages explained.

What it doesn't mean

It doesn't mean anyone can call crashes. Jones had a team, years of experience and a specific piece of research. Many people "predicted" a crash in 1987 and many more predicted ones that never came. We only remember the ones who were right.

It doesn't mean 1987 can be repeated. Markets now have circuit breakers that pause trading after big drops, and the setup that year was rare.

And it doesn't mean his returns are typical. One huge year is famous precisely because it's unusual. What carries over is the habit, not the result: think about the loss first.

Timeline

Questions