Market Wizards: The Art of Aggressive Trading
Jack D. Schwager interview, conducted 1987 — published 1989
The foundational text of the PTJ method. In Schwager's book-length interview — conducted in the months after the 1987 crash — Jones lays out his earliest systematic framework: the Eli Tullis apprenticeship on the cotton floor, the career-defining 1979 cotton loss that forged his defense-first creed, the 5:1 risk/reward filter, and the technical discipline behind the crash call. Every later PTJ interview cites or derives from this chapter.
“I am always thinking about losing money as opposed to making money. Don't focus on making money; focus on protecting what you have. At the end of the day, the most important thing is how good are you at risk control.”
Summary
Jack Schwager interviewed Paul Tudor Jones in the months after the October 1987 crash, when Tudor Investment Corporation had just produced the most famous single-month return in hedge fund history, and published the conversation in 1989 as the "Art of Aggressive Trading" chapter of Market Wizards. It is the foundational text of the PTJ method: the Eli Tullis apprenticeship on the New York cotton floor, the career-defining 1979 cotton loss that turned a brash young trader into a risk obsessive, the 5:1 risk/reward filter, the 200-day moving average rule, and the contrarian preference for trading market turns over riding the middle of trends.
Every later PTJ interview — from the 2009 Buckley commencement address to the 2026 Invest Like the Best conversation — restates ideas that appear here first. The chapter is copyrighted book text, so this page reproduces only short direct quotes that already circulate widely on trading and investing sites, each in its widely circulated form. Wording may differ slightly from the printed book; no narrative passage from the chapter is reproduced.
On the single most quoted line in all of trading literature:
"Losers average losers."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the defense-first creed in one sentence:
"The most important rule of trading is to play great defense, not great offense."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the trading rules he lives by:
"Don't ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don't have control. For example, I don't risk significant amounts of money in front of key reports, since that is gambling, not trading."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On defense as the whole game:
"I am always thinking about losing money as opposed to making money. Don't focus on making money; focus on protecting what you have. At the end of the day, the most important thing is how good are you at risk control."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the asymmetry filter behind every position:
"I'm looking for 5:1 Risk / Reward ratio. Five to one means I'm risking one dollar to make five. What five to one does is allow you to have a hit ratio of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I'm still not going to lose."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On cutting losers without negotiation:
"If I have positions going against me, I get right out; if they are going for me, I keep them. Risk control is the most important thing in trading."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the exit that always stays open:
"If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On starting each day assuming he is wrong:
"Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out. Don't be a hero. Don't have an ego. Always question yourself and your ability."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the technical line that became his signature risk rule:
"My metric for everything I look at is the 200-day moving average of closing prices."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
And the operational version of the same rule:
"One principle for sure would be: get out of anything that falls below the 200-day moving average."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the second, less famous stop he runs on every trade:
"When I trade, I don't just use a price stop, I also use a time stop. If I think a market should break, and it doesn't, I will often get out even if I am not losing any money."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On where the real money is — and what it costs to earn it:
"I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On why turn-trading cannot be taught:
"There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the two ego failures that end careers:
"First of all, never play macho man with the market. Second, never overtrade."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On why macro, specifically:
"I love trading macro. If trading is like chess, then macro is like three-dimensional chess."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
On the morning of Black Monday, October 19, 1987:
"When we came in on Monday, October 19, we knew that the market was going to crash that day. As the previous Friday was a record volume day on the downside. The same thing happened in 1929, two days before the crash."
— Paul Tudor Jones, widely circulated from the 1989 Market Wizards interview
Key Themes
The chapter is the origin text of losers average losers — the rule against adding to losing positions — and of the 5:1 risk/reward asymmetry filter that makes a low hit ratio survivable. Its defense-first creed is stated here more plainly than anywhere else: play great defense, protect what you have, assume every position is wrong. That creed anchors the defense first concept, and the exit discipline it implies later crystallized into the 200-day moving average rule.
Read together, the exit quotes form a complete operating system, not a collection of aphorisms. The 200-day line defines where risk is wrong; the price stop and the time stop define when to act on it — the time stop being the subtler idea, since it exits positions that are not even losing money, purely because the market failed to confirm the thesis on schedule. The "get out, because you can always get back in" line supplies the psychology that makes the mechanics executable: an exit is reversible, so it never has to be heroic. Later PTJ interviews repeatedly restate this stack almost verbatim, which is why the chapter functions as the reference implementation of his risk process.
The turn-trading passages are the offense that the defense exists to enable. Jones concedes the consensus view — you get killed picking tops and bottoms — and then reports twelve years of doing exactly that profitably, because the 5:1 filter and the exit stack make being early survivable. The warning that no training prepares you for the last third of a move is the humility clause: the same chapter that claims the biggest scores also refuses to teach them as technique. The Black Monday recollection is the trading floor expression of the analog model — the 1987-overlaid-on-1929 framework he built with Peter Borish — while the apprenticeship stories trace the whole system back to Eli Tullis on the cotton floor.
Context & Significance
Market Wizards made Jones the archetype of the modern macro trader: technical, contrarian, defense-obsessed, and willing to bet heavily when the asymmetry demanded it. The interview's timing matters — Schwager sat down with him weeks after the crash, so the book captures the 1987 call while the details were still fresh, years before memory could polish the story. Later retellings, including the Trader documentary narrative and the 2026 Invest Like the Best interview, consistently cite this chapter as the record of first resort.
One honesty note about provenance: neither the exact date nor the setting of the Schwager interview is documented in publicly accessible sources — the book itself does not publish session details, and this KB found no reliable public record of when or where the conversation took place. What is public is the afterlife. The quotes above circulate on trader-education sites (carrytrader, TraderLion, Traders Mastermind), quote archives (AZ Quotes), and mainstream market media (a 2025 Morningstar/MarketWatch column calls the 200-day line "a widely cited quote typically attributed to legendary trader Paul Tudor Jones"), and they reappear in each new generation of trading books. That circulation is the verification mechanism available for a copyrighted chapter: every excerpt on this page can be checked against multiple independent public pages, and anything that could not be found in circulation was excluded.
For this knowledge base, the chapter is load-bearing: the concepts of risk control, asymmetry, and turn-trading that organize the entire archive are all stated here in their earliest form. Because the underlying book text is copyrighted, the KB handles the source through its widely circulated quotations only — a constraint that also keeps every excerpt on this page independently checkable against public circulation records.