Has this become a major part of your life?
I would say so. The markets have been so good to me that I feel I should give back something in return. I
can't say that I have been successful because I am better than anybody else. By the grace of God, I was in the right
place at the right time, so I feel a tremendous obligation to share.
Is the positive intensity of winning as strong as the pain of losing?
There is nothing worse than a bad trading day. You feel so low that it is difficult to hold your head up. But, if I
knew that I could also have a similar experience in the exhilaration of winning, I would take the combination of
winning and losing days any time because you feel that much more alive. Trading gives you an incredibly intense
feeling of what life is all about. Emotionally, you live on the extremes.
What is the most important advice you could give the average trader?
Don't focus on making money; focus on protecting what you have.
Do you still see yourself trading ten or fifteen years down the road?
I wouldn't have it any other way.
Paul Jones was a winning trader from his start in the business, but, in the early years, his performance was
volatile. It took a traumatic trading experience to permanently forge the importance of risk control into his mind.
Since that gut-wrenching cotton trade in 1979, Jones has managed to maintain excellent net profitability, while
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bringing his risk way down.
Today, risk control is the essence of Jones' trading style and success. He never thinks about what he might
make on a given trade, but only on what he could lose. He mentally marks each of his positions to the market. No
matter how large a profit he may have in a position, in Jones' mind his entry price was the previous night's close.
Since this approach assures that there is never a cushion in his trades, Jones never gets complacent about any of his
positions. He not only watches the risk of each position, but he closely monitors the performance of his entire
portfolio in real-time. If his total equity drops 1 to 2 percent during a single trading session, he might well liquidate all
of his positions instantaneously to cut his risk. "It is always easier to get back in than to get out," he says.
If Jones' trading starts going poorly, he will continually reduce his position size until he is on track again. That
way, when he is trading his worst, he is also trading his smallest. In any month with net trading losses, Jones will
automatically reduce his risk exposure to make sure he never registers a double-digit loss in a single month. After big
winning streaks, he is particularly cautious about getting overconfident.
In short, Jones maintains risk control in a dozen different ways. As he puts it, "The most important rule in
trading is: Play great defense, not great offense."
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