Started trading with $3,000 from a credit card
Wikipedia and his own account in Market Wizards agree that his first stake of about $3,000 came from a MasterCard credit line, and that his early trades were in soybean contracts
Famous Traders · Global Macro
Bruce Kovner
Bruce Kovner / From Taxi Driver and $3,000 to Founder of Caxton Associates
A Harvard PhD student who drove a taxi and studied the harpsichord before he started trading with money from a credit card, then built a Global Macro fund managing tens of billions of dollars. On this page you can plan your exit from his 1977 soybean trade, cut your order size in half, and see how positions that move together add up to one big block of risk.
PROGRAMMEThe World TraderCAXTON ASSOCIATES · 1983–2011
BKBRUCE S. KOVNER
- I1977 · Allegro$3,000 from a credit card
- IILate 70s · AndanteCommodities Corporation
- III1983 · MaestosoFounded Caxton Associates
- IV2011 · CodaHanded over to Andrew Law
Illustration: designed as a concert programme, because he studied the harpsichord and chairs the Juilliard School
Born1945
Caxton1983–2011
Reported annual average>21%
First capital$3,000
THE DECADE≈87%/yrAverage return over roughly 10 years before 1989, as stated by Jack Schwager in Market Wizards
THE FIRM>21%/yrCaxton’s average return over his 28 years as CEO, according to his official biography
THE RULE1–2%The risk per trade he recommends, instead of the 5–10% beginners often use
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ProfileQuick facts
NameBruce S. Kovner
BornFebruary 1945 in Brooklyn, New York City, USA
EducationBachelor’s degree from Harvard College, then PhD studies at the Kennedy School of Government, which he did not finish
Before tradingDrove a taxi, worked on political campaigns, studied the harpsichord and wrote articles
His own fundFounded Caxton Associates in 1983 and was CEO for 28 years until stepping down in 2011
Best known forHis official biography says Caxton averaged more than 21% a year and managed up to about $12–14 billion at its peak
StyleGlobal Macro, trading currencies, interest rates and commodities from an economic view, using charts to confirm timing and strictly controlling risk per trade
TodayManages his own money through CAM Capital, has chaired the Juilliard School since 2001, and is a philanthropist in music and education
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Early lifeFrom Harvard classrooms to the taxi driver’s seat and the trading room
Kovner was a gifted student who won a scholarship to Harvard and nearly became an academic in political economy, but he left to live a varied life, driving a taxi, working in politics and studying the harpsichord, before falling for financial markets in his early thirties
He taught himself the currency and commodity markets, started trading with money borrowed on a credit card, then got a job at Commodities Corporation, a breeding ground for several legendary traders, before leaving to found Caxton in 1983
SCORE · 1945–presentTap each note to read the details
Born in February 1945 in Brooklyn, New York City. His father was an engineer. He grew up in both New York and Los Angeles, and was student body president of Van Nuys High School at 16
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What he got from Michael MarcusSeeing with his own eyes someone make millions of dollars from trading convinced him that that kind of success was truly within reach
Paraphrased from what he told Market Wizards, not a direct quote
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Soybeans 1977Lab: if you were Kovner in 1977, when would you exit?
About $3,000 from a credit card took his soybean account up to about $45,000 in roughly six weeks, then the market reversed so hard that he closed the position with about $22,000 left. Set a trailing stop and see how much profit you would keep
Account peak—
Exited at—
Share of peak profit kept—
The daily path is a simulation. The start, the peak and the actual exit are based on the figures that have been retold, which differ slightly between sources (a peak of about $40,000–45,000, an exit at about $22,000–23,000). On limit-up or limit-down days, the real exit could be worse than planned
His first ruleEvery time I enter a position, I already know where I will cut my loss
Paraphrased from his interview in Market Wizards (1989), not a direct quote
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04
TempoLab: the pace of compounding at 87% vs 21%
87% a year sounds exciting, but making 21% a year for 28 straight years with tens of billions of dollars is just as rare. Change the pace and the time span, and see what $1,000 grows into
$1,000 becomes—
Growth—
Money doubles every—
Compounded once a year, excluding fees, taxes and losing years. A fund’s real returns go up and down each year rather than staying constant as in the chart. The chart uses a logarithmic scale so numbers hundreds of times apart fit in one picture
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Cut it in halfLab: whatever size you had in mind, cut it in half
A made-up set of 40 trades: 15 winners, 25 losers, with winners making 2–3 times the risk. The system has an edge, but it includes a 7-trade losing streak. See how different beginner-style risk per trade is from Kovner-style risk, then press cut in half
Final account (starting at 100)—
Deepest drawdown along the way—
Gain needed to break even—
The result of each trade is set in advance as a multiple of the risk (R), such as +2R or −1R, and compounded from the current account, purely to show the mechanism. In the real world the order of wins and losses is uncertain, and losing streaks can be longer than this
His best-remembered adviceWhatever position size you think is right, cut it by at least half
Paraphrased from his interview in Market Wizards (1989), not a direct quote
PROGRAMME NOTE · COSTCut your size, then cut your costs tooTrade with XM account through 1TRADER and get up to 90% of the IB commission on every lot
1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
06
CorrelationLab: the organ pipes of hidden risk
Kovner warned that holding several positions whose prices move the same way is like holding a single position many times bigger than intended. His example was 10 oil stocks at 2% each, which really carry about 15–20% combined risk. Each small pipe is the risk per position; the big pipe on the right is the true combined risk
Risk per position—
Estimated combined risk—
Same as holding one position larger by—
Calculated with the portfolio volatility formula, assuming every position has the same volatility and every pair has the same correlation. The correlations in the preset baskets are made-up values for illustration; real currency pair correlations change over time
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Fact checkFact check: truth and legend
Famous traders’ stories are often retold until they are exaggerated. We sort each one by the weight of the evidence
Turned $3,000 into $45,000 in six weeks
The account did reach about $40,000–45,000, as the story goes, but the market reversed so violently that he closed with about $22,000–23,000 left. The figures differ slightly between sources, so this is more a lesson about giving back profits than about getting rich fast
An average return of about 87% a year over roughly 10 years
This is the figure Jack Schwager gave in Market Wizards (1989) for the roughly 10 years before the book came out, not the return over Caxton’s whole life
Caxton averaged more than 21% a year
His official biography says more than 21% a year over 28 years, but Wikipedia cites about 14% a year for the fund. The figures may differ because of the time period and fee deductions, and it is a private fund that has not published all its yearly accounts
Made more than $300 million in 1987
This appears in several analysis articles, but no fund document confirming the figure has been found, so treat it as a retold number
He was a pure technical or trend-following trader
He said himself that almost every position had an economic rationale behind it, and that he used charts as a tool to confirm timing, not as a mechanical trend-following system
Risked only 1–2% per trade
In Market Wizards he said beginners usually trade three to five times too big, risking 5–10% per trade when they should risk only 1–2%, and advised cutting the size you had in mind by at least half
Stepped down after heavy losses in the 2008 crisis
Caxton’s data shows the fund still returned about 13% in 2008 despite heavy withdrawals. He stepped down as CEO in 2011 and handed over to Andrew Law, who had overseen investments since 2008
Every lot you trade with XM through 1TRADER earns cash back of up to 90% of the IB commission, lowering your costs over time
Open an account for cash back ↗1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
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LessonsLessons for Forex and gold traders
Your checklist
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Cut your size in half
The order size that feels right is usually too big. He advised cutting it by at least half and risking no more than 1–2% of the account per trade
Know your exit before you click
Every position he took had a stop loss set in advance, placed where reaching it would mean his view was truly wrong, not just normal volatility
Beware of positions that move together
Going long EUR/USD, GBP/USD and AUD/USD at the same time means shorting the dollar three times. If the dollar strengthens, every trade loses together, so count them as a single block of risk
Have a view first, then confirm with charts
He started by asking where the economy and policy were heading, then used charts to find the entry and the point where his view would be wrong
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Quiz5-question quiz
Question 1 / 5
Where did Kovner’s first trading capital come from?
He borrowed about $3,000 from a MasterCard credit line to trade soybeans in 1977
What fund did Kovner found?
He founded Caxton Associates in 1983 and was CEO until 2011
Following his advice, roughly how much should you risk per trade?
He said beginners often risk 5–10% per trade when they should risk only 1–2%
You hold 8 positions that move almost identically, at 2% each. What is the combined risk closest to?
If every trade loses together, 8 × 2% = 16%, like holding a single position 8 times bigger
Before becoming a trader, which instrument did he study?
He studied the harpsichord and later became chairman of the Juilliard School
0/5
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Trade like KovnerFollow in Kovner’s footsteps: a clear view, small size, an exit ready
What you can apply is building a view from the economy, risking only 1–2% per trade, and counting positions that move together as one block of risk.
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Further readingFurther reading
- Market WizardsJack D. Schwager · 1989The World Trader interview covers the 1977 soybean trade, his 1–2% risk control and his Global Macro way of thinking
- More Money Than GodSebastian Mallaby · 2010A hedge fund history that shows the era of Commodities Corporation and the first generation of Global Macro funds
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FAQFrequently asked questions
Who is Bruce Kovner?
An American fund manager born in 1945 in Brooklyn, who founded Caxton Associates in 1983 and was CEO for 28 years. His official biography says the fund averaged more than 21% a year. Before trading, he drove a taxi and studied the harpsichord
How did he start trading?
In 1977 he borrowed about $3,000 from a MasterCard credit line to trade soybean contracts. The account rose to about $40,000–45,000, then the market reversed and left him with about $22,000–23,000, before he went on to become a trader at Commodities Corporation
Why did he advise cutting order size in half?
He saw that beginners often risk 5–10% per trade, so just a few losses in a row badly damage the account. He advised risking only 1–2% and cutting the size you had in mind by at least half
What is the risk from correlated positions?
If you hold several positions whose prices move the same way, such as going long several currency pairs on the same side of the dollar, they all lose together when you are wrong. He warned that this equals holding a single position many times bigger than intended
How can his ideas be used with Forex and gold?
Start from an economic and central bank view, use charts for timing, set a stop loss before every entry, risk 1–2% per trade, and count currency pairs that move together as one block of risk
Educational content, not investment advice. Return figures are publicly reported figures. The labs use made-up data and models. · risk disclosure · Forex glossary