Bruce Stanley Kovner is born 1945 in Brooklyn, New York. He is the Chairman of CAM Capital, an asset management fund established in January 2012 to manage exclusively for Mr Kovner and senoir employees. He is considered one of the top traders in the world. Despite his incredible track record and huge trading accounts, Kovner has managed to keep a low profile. Therefore, there is surprisingly little information about his personal life. The interview in Jack D. Schwager’s book “Market Wizards”, was very insightful and a must read for all participants on financial markets.
Where many top traders started buying stocks while still in high school, Kovner struggled to find a direction in his early career. Kovner started studying political economy in 1962, at Harvard. After finishing his bachelor’s degree in 1966, he started a Ph.D. program at the John F. Kennedy School of Government, which he did not finish. After dropping out of his Ph.D program, Kovner took jobs as political campaign manager, cab driver, and pianist before ending up in the world of commodities trading.
According to his interview in “Market Wizards” he became interested in financial markets in the mid-1970s. He turned $3,000 into $45,000 in a matter of months, before losing $23,000 on a disastrous soybean trade. He later claimed that this first, nerve-racking trade taught him the importance of risk management.
After a few months, Kovner applied for a job as assistant trader at Commodities Corp., a firm that traded everything from cocoa to corn to currencies. Here he worked under top trader named Michael Marcus, and gained widespread respect as a trader. This ultimately led to the establishment of Caxton Associates in 1983.
With the opening of Caxton Associates, Kovner was one of the first hedge-fund managers who aimed to profit from macroeconomic trends by trading a variety of assets, like stocks, bonds, forex and commodities. The main Caxton Global Investment fund has returned an average 21% a year since, compared to the 11% by the S&P 500 (incl dividends). The massive returns made Kovner an estimated $5.3 billion fortune, according to Forbes.
Tips for Traders
When Kovner was asked by Schwager what made him a top trader, he said the following: “First, I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine that soybean prices can double or that the dollar can fall to 100 yen. Second, I stay rational and disciplined under pressure.”-Market Wizards).
Qualities a good trader possesses are, according to Kovner: being strong and independent, and he/she can be contrary in the extremes. Furthermore, be disciplined!, a habit all top traders possess, and a understanding that trading is also about making mistakes and accept that side of trading.
Most of the tips Kovner gives in his interview are unsurprisingly related to risk management. Too often novice traders tend to overtrade, while they actually should under trade, under trade, under trade. Be disciplined in taking right sized trades, don’t be greedy. Also don’t get caught in a situation in which you can potentially lose a lot of money for reasons you don’t understand.
Lastely Kovner suggests that you should evaluate the risks on your current trades on your portfolio basis. If your trading rule is losing a maximum of 1% each trade and you have three trades going on (all long): EUR/USD, EUR/GBP, EUR/CHF. It are not independent trades, but instead highly correlated trades. This means that if the euro is going down, all these trades are like to get stopped out, meaning instead of risking 1% each trade you are trading 3% risk.
Hope Bruce Kovner his story and tips will be inspirational and useful for you.
Market Wizards – Jack D. Schwager (1989)