Kovner borrowed $3,000 on his Master Card in early 1977 and quickly made $1,000 on his first two trades but later he ran a Soybean position from just $4,000 up to $45,000 in a six week period but due to a lack of discipline he ended up with a a loss of $23,000. Although he still had $22,000, five times left, the loss of profit is etched on his memory.
“I had a huge gain but lost half before getting out? I lost half the profit in an hour. I closed out the trade and was physically sick for a week. In retrospect that was a very good thing, says Kovner. It helped me understand risk and create structures to control risk."
Many of the great traders took a big loss before implementing, rigid money management parameters and Bruce believes money management is the key to making big gains.
Bruce believes that there are two important elements that have helped him become successful, his trading strategy which looks at the big picture and and his strict money management rules..
Trading Strategy
The first element would be his ability to correctly identify and predict upcoming trend changes and future price movements and he looks at the big picture to achieve this:
He spend tremendous amount of time to follow and analyse intricately the economies of many different countries and integrate this intermarket analysis into his trading strategy.
He gets a gurus report daily to check sentiment and wants to know when a lot of people are going to be wrong.
Uses technical analysis but he needs to understand why the market should move, hence looking at the broader picture.
He has the ability to imagine a world different from today ( referred to as alternative scenarios) and really believe it can happen which allows him to trade with courage and conviction.
Money Management
The other element would be his ability to stay non emotional and disciplined, under the pressure of trading. Which helps the best traders make right decisions at the right times and this relies on strong money management.
He places stops that indicate the trade is wrong, NOT at a point determined by the maximum dollar loss.
He monitors the correlation of all his positions, measured by total risk in the market each and every day.
Whenever he enters a position, he has a predetermined stop like all good traders.
What Makes a Great Trader?
While he believes that good traders can be trained, he also believes that only a handful would actually make it in trading and this has nothing to do with academic prowess but their attitude of mind.
In fact, those who do make great traders are usually the ones that are strong, independent and are able to go against the majority and keep their emotions in check. These traders are the ones who are wiling to go into positions that other traders would not consider and have the discipline to adhere to the rules and thus trade with the right trade position sizes at the right times.
Final Words
Kovner launched Caxton (named after a 15th century English printer Kovner learned about while putting together his rare book collection) in 1983.
He has trading screens in both his Park Avenue apartment and his country house, a Georgian-style mansion 75 miles north of New York City and is known to live trading insisting his staff, keep him in touch with market developments 24 hours a day. Bruce's track record stands up there with the best and he is therefore, one of the best traders of all time.
