John Paulson Strategies: “The Big Short” Trader
Published: July 27, 2020 by Andrew
Defined as one of the most important names in high finance, John Paulson is a man who made one of the greatest fortunes in the history of the Wall Street stock exchange.
In this guide we will describe his great trader’s financial history, career, investments and success strategies.
We will also offer the best platforms to test its strategies, such as eToro, one of the most reliable commission-free online broker platforms on the market.
Who is John Paulson
John Alfred Paulson was born in New York in 1955 and is an American billionaire, famous for his very profitable investments.
He directs Paulson & Co., a company he founded in 1994, which deals with investments.
It appears that he inherited the aptitude for business from his father who worked as a financial director in New York.
After graduation and a short parenthesis in an import-export company, he enrolled in university and graduated from Harvard in 1980.
After the master he started working in the mergers and acquisitions department of some companies until he founded his investment company: Paulson & Co. which is still active and very profitable.
John Paulson: the career
John Paulson’s career began with an import-export business in Quito, Ecuador but he soon realized that it was not a big business.
After the Harvard Masters, Paulson started working as a consultant in the Boston Consulting Group but after a few years he joined Odyssey Partners and later Bear Stearns, where he believed the most profitable investments were made.
After gaining good experience in the financial markets, he founded Paulson & Co. with a capital of $ 2 million and a single employee.
Considering the kind of business he intended to do, that capital was very poor, but despite this, he opened his office in Manhattan.
Paulson & Co set a record for a hedge fund making $ 5 billion in one year in 2010.
What platforms to use to invest?
This famous businessman, one of the most famous traders in the world, invests in many assets, including: Stocks and Commodities, therefore to try to “follow” his investment strategies, a platform is needed that offers these securities and allow them to negotiate both upward and downward.
In fact, John Paulson also often points to the downside with the short sale of the securities.
The simplest and cheapest platforms, which allow you to invest in stocks and other assets, are CFD Brokers, which do not charge commissions, perfect for learning to invest even with small capital.
CFDs (contracts for difference) give the opportunity to bet both upwards and downwards and make money (if the forecast is right) in any economic situation.
These financial contracts are absolutely safe and regulated.
Invest with CFD Brokers
Let’s see the main requirements that a CFD Broker must possess in order to operate in safety:
- A CONSOB license, CySEC or equivalent, to guarantee the security and reliability of the Broker.
- The possibility of investing both upwards and downwards (Selling Short).
- A minimum deposit of no more than 250 euros.
- Offer commission free trading.
The intermediaries that offer the best balance between platform and services offered are, in our opinion, eToro and ForexTB.
eToro: Automated Trading and Intuitive Platform
eToro is the most used CFD broker in the world and therefore could not miss among our choices. Its 7 million customers and the licenses can confirm the absolute reliability of this intermediary.
The platform of this Broker has been chosen by many users because it is among the most intuitive on the market and even a novice trader can immediately learn how to manage graphs and indicators.
To invest with eToro just choose a security, click on the “Invest” button on the platform, decide how much to bet on the operation and whether to buy or sell (short).
For traders who don’t like to study graphs, eToro has developed an automatic investment system that copies the operations of the most experienced traders in the world (on eToro): Copy Trading.
Copy Trading has two major advantages:
- You can get the same earnings as experienced traders
- You learn the strategies of these big investors.
To use Copy Trading you need to follow these steps:
- You register on eToro with the link at the end of the review.
- In the “Copy People” section, the traders to be copied are chosen, based on their earnings.
- With a click, Copy Trading will copy the operations of the chosen traders to your account.
So you will get the same results as these trading experts (in proportion to the investment), without doing anything.
With Copy Trading even an inexperienced investor can earn like a trading guru, because he copies his trades!
Let’s see what results we are talking about:
Click here and choose which traders to copy
Both “automatic trading” and “manual trading” can also be tested on a free Demo account, without taking risks, with virtual money.Click here to sign up for free
To learn more, read our full eToro review.
ForexTB: Course and Signals to become a Trader
We chose ForexTB because it is the most suitable broker for those who want to become a trader.
The tools and the support it offers to investors allow you to quickly learn all the notions of this fascinating discipline, starting from a trading course.
ForexTB has created one of the most complete courses on the market and offers it for free to its users, just download it from the link below:Click here and download the trading course for free
The basics learned in the course must be tested and for this there are two platforms available to investors:
- The Web platform, very simple and usable by any browser and device without downloading any software
- Metatrader 4, the most used trading software in the world, is very technical and full of customizable tools and indicators
The operational support of this Broker reaches its peak with the free Trading Signals that it makes available to investors. These are indications developed in collaboration with Trading Central and reach a success rate of 70%.To receive free trading signals click here
Read our ForexTB review for more information
John Paulson, The Big Short
The Big Short became a masterpiece movie, inspired by one of the most brilliant investments of John Paulson’s career.
His company was working very well and in a decade it had managed to make profits of around $ 300 million.
The profits came mainly from investments in mergers and acquisitions of large companies.
John Paulson peaked in 2007 when he predicted the collapse of the US housing market and subprime mortgages.
With his company he has invested in credit default swaps, a huge downside bet: the big short sale!
In practice, Paulson has bet against mortgage-backed securities, going “short” on the real estate market, as they say in the jargon, essentially aiming for the collapse of this market.
In that year, John Paulson made more than $ 4 billion, one of the most profitable investments in U.S. history.
John Paulson Investments
John Paulson didn’t just make “The Big Short”, even if that’s the investment that made him famous.
In 2010, it made $ 5 billion in just one year with hedge funds.
Those who know the basics of trading know that it is not only made of winnings but also of losses and defeats have not been lacking in the financial career of this great trader.
Some of its loss making investments have been made in some US banks and its Paulson Advantage Fund has also suffered losses over the years.
But these losses could not cloud the huge profits made by Paulson. In the end what matters is the positive balance, the profits outweighed the losses and made him one of the most successful investors in the history of “Wall Street”.
John Paulson Strategies
Before cashing in on the staggering $ 20 billion profit in the real estate market (between personal and client profits), Paulson was known for an ultra-conservative investment style called merger arbitrage.
In practice, this strategy is based on the purchase of shares of a company that is about to be acquired or to merge, in the hope that the operation will be successful, giving a strong boost to the price of the securities.
But despite these investments, John Paulson has a great intuition and has always managed to notice before others the situations at risk of collapse.
His most effective strategy is based on short selling when a security is extremely overvalued.
But the strategy behind the great profits of this trader is based a lot on intuition and experience in the markets, because there are many signs to be taken to hit a Big Short and not all visible on the charts.
John Paulson’s Instinct
Paulson’s contrarian instinct led to his biggest wins.
In 2005 the real estate market was in a strong bullish trend. Prices skyrocketed, speculators made big profits but the party was about to end.
Everyone thought that those prices would never go down, but not Paulson, who sensed the imminent collapse!
John Paulson’s instinct for numbers and the ability to break down complex ideas into simple terms led him to make his Big Short.
Does John Paulson leave the world of hedge funds?
According to recent rumors, John Paulson is considering converting his investment fund into a private fund.
The billionaire has said that despite recent volatility, long-term returns have been more than positive but he wants to devote more time to the family.
Paulson & Co started out with a $ 2 million investment in 1994 and now manages approximately $ 9 billion.
To motivate his choice, Paulson cited fellow hedge fund managers George Soros and David Tepper as two investors who went from wealth management to focusing on their personal fortunes.
Between 2007 and 2008, his Big Bet paid off spectacularly, earning him $ 20 billion in profits for customers and investors.
At the time, his personal earnings came close to $ 4 billion, one of the biggest fortunes accumulated by a crisis in the history of the financial markets.
Intuition and great self-confidence have made John Paulson one of the great traders in history, with some of the most incredible profits ever made.
But these goals have also been achieved with a lot of study and perseverance. By combining fundamental analysis with technical analysis, this exceptional investor has predicted some of the biggest market movements in recent decades.
To get closer to his financial sensitivity you need to train a lot in trading and to do it without taking risks we need Demo accounts, which perfectly replicate real platforms but use only “virtual” money.
Here are the links to access the Demo accounts of the best trading platforms that we have reviewed:
- Access the eToro Demo account for free by clicking here
- Register for free on ForexTB and access the Demo account from this link
John Paulson is one of the most profitable traders in Wall Street history
The Big Short is a movie about John Paulson’s big short sale when he predicted the 2007 US housing crisis
Its strategy is based on forecasting large market movements. The famous Big Short allowed him to earn $ 4 billion in a year.
CFD brokers are the most suitable intermediaries to invest in security, without paying commissions.