Jesse Livermore was a legendary trader and investor that ended his life by suicide after a boom and bust cycle throughout most of his life. One of the most legendary trading books is based on his life: Edwin LeFevre’s The Reminiscences Of A Stock Operator.
In this article, we take a short look at Jesse Livermore’s life and early career, and we end the article with some of his most famous trading quotes.
Jesse Livermore’s early life and career
Jesse Livermore was born on July 26, 1877, in Shrewsbury, Massachusetts. He was an American stock trader and investor and is considered the pioneer of day trading. He was the world’s richest man at one time, but upon his death, his liability surpassed his assets. The Reminiscence of a Stock Operator by Edwin Lefèvre was based on Livermore.
He learned how to read and write at the age of 3. By 14, he dropped out of school to work on his father’s farm. However, he ran away from home.
Livermore is the author of How to Trade Stock and was the most excellent trader of all time. He was worth $100 million at his peak in 1929; this is about $1.5 billion today. He was self-funded (traded with his own money), trading using a system developed by him, and did not trade for anyone else. Trend following was his forte, and he would usually pick trending stocks while staying away from the range-bound store. He used volume analysis together with price patterns to determine entry and also to decide if a position would be left to run. Although he lost his fortune several times, Livermore was highly successful.
At the age of 14, he was employed as a board boy, posting stock quotes at the MA branch of Paine Webber stock brokerage in Boston, earning $5 per week.
By the age of 15, he made $3.12 on a $5 bet he made on Chicago, Burlington, and Quincy Railroad in a bucket shop. He earned close to $200 per week, trading at the bucket shops in Boston, more than what he was paid at Paine Webber— he was nicknamed “The Boy Plunger.” In 1893, at age 16, Livermore resigned from his low-paying job and started trading full-time.
Between 1895 and 1897, he made a net profit of $10 000, a 1000% return in three years of trading. He was continuously suspended from trading by most bucket shops because of his consistent profits.
At the age of 23, he moved to New York, arriving when the bull market was strong. He turned $10000 to $50000 in five days in a long position at Harris, Hutton & Company Stockbroker. His first great win was in 1901 when he went long on Northern Pacific Railway, making $500000 from his initial $10000.
And on May 1901, he predicted retracement in price and opened a short position using a 400% margin, and lost his equity. Afterward, he took a loan of $2,000 from Ed Hutton and relocated to St. Louis, where he was not known, and went back to betting at bucket shops. Livermore has had his fair share of failures, filing for bankruptcy more than twice and rebounding back to success.
One of his favorite books was Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay. He enjoyed fishing; he caught a 436-pound swordfish in 1937.
Livermore died by suicide on November 28, 1940. He shot himself with an Automatic Colt pistol in the Sherry-Netherland hotel in Manhattan.
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- Joe Ritchie – an early quant in the option markets
- Micheal Masters – Stock Market Wizard
- Monroe Trout – one of the first Market Wizards
- Alexander Elder – Trading Author And Indicator Innovator
- Mark Ritchie – Master Option Trader (God In The Pits)
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Jesse Livermore trading strategy quotes
We end the article with some of Jesse Livermore’s most famous quotes, mostly taken from The Reminiscences Of A Stock Operator:
The speculator is not an investor. His object is not to ensure a steady return on his money at a good rate of interest, but to profit by either a rise or a fall in the price of whatever he may be speculating in.
The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that every day will be the last day – and you lose more than you should had you not listened to hope – to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out – too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.
I came out in fine shape. The newspapers said that Larry Livingston, the Boy Plunger, had made several millions. Well, I was worth over one million after the close of business that day. But my biggest winnings were not in dollars but in the intangibles: I had been right, I had looked ahead and followed a clear cut plan. I had learned what a man must do in order to make big money; I was permanently out of the gambler class; I had at least learned to trade intelligently in a big way. It was a days of days for me.
I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out….Of all speculative blunders there are few greater than trying to average a losing game….Always sell what shows you a loss and keep what shows you a profit…. Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and to the soul.
There is what I call the behaviors of a stock, actions that enable you to judge whether or not it is going to proceed in accordance with the precedents that your observation has noted. If a stock doesn’t act right, then don’t touch it: because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
What beat me was not having brains enough to stick to my own game – that is, to play the market only when I was satisfied that precedents favored my play. There is time for all things, but I didn’t know it…..There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily – or sufficient knowledge to make his play an intelligent play.
There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
Markets are never wrong – opinions often are.
A stock operator has to fight a lot of expensive enemies within himself.
After spending many years in Wall Street and after making and losing millions of dollars, I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!
There is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
There is time to go long, time to go short and time to go fishing.
Patterns repeat, because human nature hasn’t changed for thousands of years.
The stock market is never obvious. It is designed to fool most of the people, most of the time.
Profits always take care of themselves but losses never do.
A man must believe in himself… I don’t believe in tips.