One of the Ways to Build a Career in Trading, Especially in Forex, Is to Draw Expertise and Knowledge - Both Theoretical and Practical - From Those Who Have Made It, From Those Who Have Managed to Become Successful Traders. There Is So Much to Learn From Bruce Kovner. He Is, Results in Hand, the Best Forex Trader in the World. He Has Always Maintained a Low Profile, at Least Until the Foreign Exchange Market Reached the Masses and Therefore His Figure Also Acquired Collective Interest. He Shared His Story in a Recent Book by Marco Mottana and Virgilio De Giovanni "How to Invest Successfully".

The Story of Forex Trader Bruce Kovner

Bruce Kovner's family background is absolutely uninteresting. He was born in 1945 in New York, into a middle-class family, with an engineer father and a housewife mother. He studied political economics at the John F. Kennedy School of Government, graduated but did not pursue an academic career. In those years, he worked for some politicians as a spin doctor and also dedicated himself to the piano. His trading career began rather late, at 32 years old. He started with only 3,000 euros, borrowed at that. Initially, he traded in futures, making $40,000 in profits, then dropping to $23,000 due to a mistake he made, probably caused by recklessness. This passage was fundamental for him: he realized firsthand the importance of risk management, he realized how decisive the psychological factor and emotional stability are for a trader. The blow he suffered, however, was enormous. In the book, he recounts: "For many days, I believed I had chosen the wrong profession and that as a trader I was finished before I had really started. I couldn't even eat, such was the blow I had suffered." Bruce Kovner was able to transform this negative experience into a strategic approach. So to speak, he learned from his mistakes and drew a great lesson. "Since then, whenever I feel a sense of unease for unclear reasons, I immediately close all open positions that could be affected." He learned the rest, in addition to practice, during his apprenticeship with another famous trader: Michael Marcus. Specifically, he learned some fundamentals of operation but above all the role played by discipline. "He showed me how constant application could allow exceptional results and that discipline was the basis of everything. For the first time, I discovered that making mistakes was acceptable: as Marcus said, you need to study the market, form a first opinion and then accept the loss; restudy the market, form a second opinion, and re-accept a loss". Already from these fragments of biography, one can sense Bruce Kovner's philosophy. A philosophy that translates into hard work, the ability to face reality, to positively endure negative events. In light of this, the results he has achieved over the years are not surprising. He also trades in stocks, futures, precious metals and commodities, but currencies represent 50% of his trading efforts. His best year was 1987, when he made profits totaling $300 million. In the last ten years, he has generated a profit of 87%. In 1978, he started with $2,000, which in the next ten years became $1,000,000. His only negative year was 1981, when he failed to predict a bearish phase in the commodity market and lost a total of 16%.

The Secrets of Bruce Kovner

In all likelihood, Bruce Kovner's experience is not replicable. Also because the contexts in which he operated are different and, probably, his greatest secret is the ability to adapt to the various periods he went through. This does not detract from the usefulness of studying some particular techniques of his invention. One of these is "protection", which comes into play when there is to recognize a short market correction (pullback) from a principle of long-term reversal. Bruce Kovner himself explained it: "Every time I open a position, I predetermine a stop-loss level. This is the only way to be able to sleep at night. This way I know when I will close the position before I even open it. Contrary to usual, however, I do not place stop-losses based on percentage calculations (for example, 4% from the purchase price), as they could be levels easily reached in the normal fluctuation of the security. I prefer to study graphically levels that are difficult to reach, and set the stop-loss on them". Obviously, Bruce Kovner has his own trading system, which he follows pedantically, despite knowing the risks. Perfection, in fact, is not of this world and not even of the world of trading. "My trading system produces good results but lacks in terms of risk control. The way of interpreting information is constantly changing, which is why all traders retain weaknesses".

The Philosophy of Bruce Kovner

In the end, Bruce Kovner adopts the precautions that all traders adopt (or should adopt). Fundamental analysis and technical analysis are the secrets to success. Specifically, he starts from an in-depth study of the international context. He then makes a choice, which can be a market or a currency exchange, and finally practices technical analysis. In the book, he makes it very simple. "My approach to the market starts from a general view of the global political-economic situation. From this vision, I choose the markets to operate in (stocks, currencies, commodities or precious metals), after which I use technical analysis for operational timing". He reserves a jab at those who approach the one and the other practice in a fundamentalist way. Certainly, the discounting between proponents of technique and fundamentals arouses great interest and gets people talking. So even Bruce Kovner decided to have his say. "The use of technical analysis is indispensable, but those who think it serves to predict the future are completely wrong. When using charts, conclusions are always personal and subjective. I laugh at the thought of those fundamentalists who declare aversion to charts; it's as if doctors refused to measure the patient's temperature because it doesn't matter anyway". Technical analysis, therefore, not as a predictive tool, not as a sui generis crystal ball, but as a normal tool for understanding the present. As Bruce Kovner tells about himself, one senses how prudent he is. He defines himself as a trend follower, one who follows the market without trying to anticipate it. The system he adopted is complex, involving various levels and therefore based on the concept of "confirmation". Here is his explanation, accompanied by a practical example. "Indeed, I am inclined to move on the basis of fundamental economic news, but which has technical confirmation. I remember that at the time of the US-Canada free trade agreement, I was unsure about the direction of the Canadian dollar. I knew there would be a major economic event once the deal was concluded, but I didn't have a secure idea of how the market would interpret it. Rather than anticipate, I decided, as always, to wait for a price breakout up or down. Prices eventually broke to the upside, and I immediately opened positions in the same direction. If I had to act on fundamental logic, however, I would have sold earlier, given that Canada was giving the green light to imports from the States..." In conclusion, it can be said that the pillars of Bruce Kovner's success are the following. Ability to understand the scenario. As mentioned previously, Kovner starts from a general vision, which therefore must play a leading role. Discipline. It is the best weapon to counter the unpredictability of the market. In the face of excessive uncertainty, the only rock to cling to is one's own trading system. Confidence in one's own means. A solid emotional condition allows minimizing mistakes and more effectively seizing opportunities. Such confidence, however, does not imply a certain mental rigidity. On the contrary, the important thing is to be flexible, even if it forces one to question one's convictions. "When the market goes against me, despite my strong convictions, I realize I have to re-evaluate the situation because I could be wrong. This is not a problem, as long as I can self-discipline".