Bruce Kovner: Risk Management and Macro Trading
Kovner built one of the great macro funds on a simple rule: small risk per trade, stops placed where the idea is proven wrong.
Trade a real day like Bruce Kovner
A real market day with the date hidden. Run the checklist on the chart, then buy, sell or stay out: the real candles answer.
Check every point of the list before you decide. Stay out if the setup is not there.
Who they were
Bruce Kovner started trading in the 1970s and founded Caxton Associates in 1983, which he ran until his retirement in 2011.
In Jack Schwager's "Market Wizards" he explained his approach to risk, which became one of the most quoted lessons in the book.
Principles and rules
1. Small risk per trade
He tried to risk less than 1% of the portfolio on any single trade.
2. Stops at the idea's invalidation
Place the stop where the market proves you wrong, not at a dollar amount you can afford.
3. Scenarios
Think about what the world would look like if your view is right, and check whether prices agree.
4. Know when you are wrong
A stop is a decision made in advance, when you are calm.
Key lessons
- Position size follows the stop, not the other way round.
- Risk control allows you to stay in the game for decades.
- Patience with good trades, speed with bad ones.
How to practise it
In Candlemind set the stop first, at the level that invalidates the setup, then set the order's risk to 1% or less so the size follows the stop.
Frequently asked questions
How much did Bruce Kovner risk per trade?
He said he tried to risk less than 1% of his portfolio on any single trade.
What is Caxton Associates?
The macro hedge fund Kovner founded in 1983.
Summaries and paraphrases of public books and interviews, for education. Not investment advice.