Bruce Kovner: the cab driver who learned risk the hard way
In the 1970s, a part-time cab driver borrowed $3,000 on his credit card to trade soybeans. The trade grew to over ten times that. Then, in a few days, much of it was gone. What Bruce Kovner learned next is the part worth reading.
Who they were
Bruce Kovner was born in 1945 and grew up in Brooklyn and Los Angeles. He studied at Harvard and started a PhD in political science.
He taught for a while at Harvard and at the University of Pennsylvania. He didn't finish the PhD. For a time, by his own account, he drove a taxi in New York and thought about what to do next.
He read about economics and markets in his spare time. In the 1970s, with prices rising fast in the US, he got curious about commodities: farm goods, metals and fuel traded through Futures contracts.
What happened
Mid-1970s: the soybean trade. Kovner borrowed $3,000 on his credit card, a MasterCharge, and opened a futures account. He bet on soybeans.
The story is told in Jack Schwager's 1989 book Market Wizards, where Kovner was interviewed. Accounts differ a little on the numbers. Most say the account grew to somewhere around $40,000–$50,000.
Then it turned. He'd taken on more and more contracts as the trade went his way. When soybeans fell sharply, the account dropped to roughly $23,000 within days. He sold.
He was still up a lot on his $3,000. But he's described the experience as terrifying. He'd let the size of the trade grow far beyond what he could stand to lose.
1977. He joined Commodities Corporation, a trading firm in Princeton, New Jersey, that backed promising traders. There he learned from experienced traders, including Michael Marcus.
1983. He founded Caxton Associates. Over time it became one of the best-known "global macro" funds. Macro traders bet on big themes: currencies, interest rates, commodities and whole stock markets.
1989. Market Wizards came out. Kovner's chapter is one of its most quoted, mainly for what he says about risk.
2011. He stepped back from running money and handed Caxton to Andrew Law. Since then he's been known mostly for philanthropy, including as chairman of the Juilliard School's board.
The moment everyone remembers
It's the soybean trade. A beginner with a few thousand borrowed dollars sees his account multiply. Then he watches a large part of it vanish in days.
What makes the story useful is what he took from it. It wasn't "soybeans are dangerous." It was that he had sized the trade by excitement, not by a plan.
In his Market Wizards interview, Kovner describes the habits he built later. Before entering, he decides where his exit goes. He puts that exit where the market would show his idea was wrong, not where it would merely be uncomfortable. And he limits how much any one idea can cost him.
What it teaches
1. Decide your exit before you enter
This is the heart of Kovner's approach. A Stop loss isn't a guess about pain. It's the price that proves your idea wrong.
Find that place on the chart first, then work out the trade from there. See how to set a stop-loss.
2. Let the stop set the size
Once you know the exit, the size follows from the math. If you'll risk 1% of a 10,000-unit account, that's 100 units. If the stop is 2 units away, the size is 50. A math example, not a promise.
The position size calculator does it for you. See also how much to risk per trade.
3. Borrowed money cuts both ways
Kovner's first trade used a credit card and futures, which already have Leverage built in. That's why a small move had such a big effect, up and down.
Read leverage and margin explained before using either. And never trade with money you've borrowed for living costs.
4. Your feelings are information
He said the soybean trade scared him badly. Fear like that is a signal: the trade is too big for you.
If a position keeps you up at night, it's oversized. Cut it down to a size you can watch calmly. See fear of losing in trading.
What it doesn't mean
It doesn't mean starting with borrowed money is a good path. Kovner's story is famous partly because it's rare. Most credit-card trading stories don't end with a famous fund.
It doesn't mean you can copy his results. He spent years learning at a professional firm, with mentors, before running other people's money.
And survivorship bias applies. Market Wizards interviews traders who did well. We don't hear from those who tried the same thing and stopped. The habit to borrow is the one he built after the scare: exit first, size second.
Timeline
| Year | What happened |
|---|---|
| 1945 | Born |
| Early 1970s | Studies and teaches political science; drives a taxi for a time |
| Mid-1970s | Turns $3,000 into tens of thousands in soybeans, then gives a large part back |
| 1977 | Joins Commodities Corporation |
| 1983 | Founds Caxton Associates |
| 1989 | Featured in Market Wizards |
| 2011 | Steps back from Caxton |
Questions
How did Bruce Kovner start trading?
He borrowed $3,000 on his credit card in the 1970s and traded soybean futures. The account grew to tens of thousands of dollars, then lost a large part of it in a few days.
What is Bruce Kovner known for?
Founding Caxton Associates in 1983, a large global macro trading firm, and for his interview in Jack Schwager's Market Wizards, which focuses on risk control.
What was Bruce Kovner's main risk rule?
In Market Wizards, he describes placing his exit where the market would prove his idea wrong, deciding it before entering, and limiting how much any single idea can lose.
Was Bruce Kovner really a taxi driver?
Yes, by his own account he drove a cab in New York for a time in the 1970s, after leaving academic work and before trading full time.
Want the next step? We'll walk you through it.
Four free lessons by email, one every few days — each with a 10-minute exercise on a real chart.
Send Me the Free Lessons 4 short emails · No spam · Unsubscribe anytimeOr see the whole method, step by step:
See What’s Inside the Course Try everything free first. Decide when you're ready. · Open the free chart tool (works in the TradingView phone app)One chart idea a day, in plain English. Follow along: