Bruce Kovner: One of the Least Known Billionaire Traders

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INSIGHTS INTO THE MINDSET OF SUPER TRADERS – Part 11

 

“The biggest risk in trading is hubris… This is because being wrong is actually an integral part of success. A successful futures trader makes many more losing trades than winning ones. The key is to recognize and concede the mistakes and cut losses. And ride the winners.” – Bruce Kovner

 

Name: Bruce Kovner

Date of birth: February 25, 1945

Nationality: American

Website: Caxton.com

 

Career

Born in New York, Bruce is from Jewish ethnicity. His family came from Czarist Russia, fleeing persecution for their political and religious beliefs.

 

He loved football and piano. He went to Harvard for a PhD program but he was unable to finish the program.

 

Following that, he tried a number of jobs, like playing harpsichord, writing and driving a taxi. He discovered trading as a career shortly after his first marriage (he’s been married twice). He began trading in 1977 with a borrowed 3,000 USD and ended up making 23,000 USD with it. During the volatility the position was exposed to, the open profit even went up as high as 40,000 USD. This made Bruce fall on love with the markets.

 

He worked under Michael Marcus - one of the trading geniuses featured in my past articles – and soon gained respect as a disciplined and reality-based trader. Eventually he founded his own firm; Caxton Associates, LP. The firm became so successful and managed around 14 billion USD at the apogee of their achievements.

 

Outside trading, Bruce Kovner isn’t well known, for he seldom grants interviews and loves privacy so much. One source says that his Fifth Avenue mansion in New York City, the Willard D. Straight House, features a lead-lined room to protect against a chemical, biological, or dirty bomb attack.

 

He’s no longer working as CEO of his firm: he’s retired from that position.

 

As of March 2015, Bruce was worth 5 billion USD. He’s an active philanthropist and he’s also engaged in other interesting activities.

 

 

 

Insights:

1. Bruce probably wouldn’t make billions of dollars as a writer, or as a harpsichord player or as a cab driver. Or can you tell me of anyone who makes billions driving a cab? He was so lucky to discover trading. You’re so lucky to be reading this article. Few jobs can be as high paying as trading. Imagine someone who started trading with $3,000 in 1977 and is currently worth $5,000,000,000. That’s Bruce Kovner. What can you learn from this?

 

2. Trading success will, undoubtedly, cost you hard work and unrelenting desperate effort to achieve trading mastery. Without accepting this reality, you can’t be a good trader. Anyone telling you otherwise is a liar (and your experiences will later confirm the facts).

 

3. There’s one thing that can’t be avoided in trading: you must make mistakes constantly and learn from them. That’s normal. You make a trading decision, and lose. You repeat that and lose. You repeat that and lose. You make another trading decision and lose. Then a good winning period comes out and you recover the loss and move ahead. In time, you proficiency increases as you make less mistakes (which is defined as not following your rules).

 

4. Don’t follow the masses, for they’re always wrong. When most traders move in one direction, then the trend is about to change. If the masses were always right, most traders would be rich. But this isn’t so. For example, there’ll soon be a breakout after most traders have noticed an equilibrium phase.

 

5. Short rallies in bear markets and the other way round for bull markets.

 

6. Bruce said risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is his second piece of advice. Whatever you think your position ought to be, cut it at least in half.

 

This piece is ended with a quote from Bruce:

 

“My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks. The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.”

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"He loved football and piano. He went to Harvard for a PhD program but he was unable to finish the program.

Following that, he tried a number of jobs, like playing harpsichord, writing and driving a taxi..."

He is a quite special person, amazing.

 

"4. Don’t follow the masses, for they’re always wrong. When most traders move in one direction, then the trend is about to change. If the masses were always right, most traders would be rich. But this isn’t so. For example, there’ll soon be a breakout after most traders have noticed an equilibrium phase. "

 

Recently I am thinking of the difference between craft and art. Maybe know what to do can be specialized in craft, but maybe need to know why you do that, then you could reach to the level of art.

 

Thanks so much share so many interesting great traders and investor stories.

 

Cheers,