Bruce Stanley Kovner is an American investor, hedge fund manager...Born in 1945, Bruce Stanley Kovner is an American investor and a hedge fund manager. He formed the hedge fund 'Caxton Associates' in 1983, that implements a global macro strategy and manages (estimation) $14 billion.


Bruce Kovner Trading Tips


Imagine different configurations of the world and alternative scenarios

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. One of the jobs of a good trader is to imagine alternative scenarios. I try to form many different mental pictures of what the world should be like and wait for one of them to be confirmed. 


The market usually leads because there are people who know more than you do

My point is that there are thousands of difficult-to-understand mechanisms that lead the market, which come into play before the news reaches some poor trader sitting at his desk.


Forex Trading

  • We create a scenario for every currency at least once a week. We define the ranges we expect for each currency and what we will do if it breaks out of these ranges. 
  • I generally try to keep my trading confined between 8 A.M. and 6 or 7 P.M. The Far East is very important, and if the currency markets are very active, I will trade the Far East, which opens at 8 P.M. The A.M. session in Tokyo trades until 12 P.M. If the markets are in a period of tremendous movement, I will go to bed for a couple of hours and get up to catch the next market opening. It is tremendously interesting and exciting.




Market analysis is like a tremendous multi-dimensional chessboard


I like to know that there are a lot of people who are going to be wrong.

If you see that most of the members on your guru list are bullish at a time when the market is not moving up, and you have some fundamental reason to be bearish, you feel stronger about the short-trade. I like to know that there are a lot of people who are going to be wrong.


The less observed, the better the trade

There a lot fewer people paying attention to the cross rates. The general rule is the less observed, the better the trade.


Being contrarian to speculators

The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of the non-speculative activity, the greater the significance of technical breakouts. 


■ Breakouts must be violent

A violent and quick breakout is much more reliable than a typical breakout. 


Money Management Trading Tips


■ Know what you are trading

The first rule of trading is to don't get caught in a situation in which you can lose a great deal of money for reasons you don't understand.


■ Allocate less than 1 percent on any single trade

I try very hard not to risk more than 1 percent of my portfolio on any single trade. Second, I study the correlation of my trades to reduce my exposure.


Whatever you think your position ought to be, cut it at least in half

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. 


You have to be willing to make mistakes regularly


When you are long to something be short in a related market

Important is the idea of trading long in one market against short in a related market. In all my trading, if I am long something, I like to be short something else.


Whenever I enter a position, I have a predetermined stop

That is the only way I can sleep.




□ Bruce Kovner Trading Tips

Source: Market Wizards, Jack D. Schwager (c)



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