Jesse Livermore learned the art of stock market manipulation, manipulating the prices of thinly traded stocks, in bucket shops.

On March 13, 1925, Arthur Cutten – one of his biggest rivals – accused Livermore of continuing his shady dealings – not in bucket shops – but, very seriously, on the Chicago Futures Exchange.

At the beginning of his career, Jesse Livermore had traded exclusively in bucket shops. He had prospered and built up his funds. Bucket shops weren’t set up to lose money, however, and soon they were refusing to deal with Livermore or worse, were cheating him.

Livermore’s response was to select crooked bucket shops to trade with – he had no qualms about taking their money using manipulative methods. He would then build their confidence by losing in several smaller trades. Then came a big trade – and the sting.

At the bucket shop, Livermore would place a trade on a stock that he knew was only thinly traded on the NYSE. He would then trade the shares on the NYSE to move the actual stock price substantially in the required direction. The new price would come through to the bucket shop and Livermore would collect his profits.

Although Livermore stopped trading in bucket shops, Arthur Cutten suspected Livermore continued to engage in market manipulation.

Time Magazine (May 25, 1925) carried the story of the events of March 13, when “Jesse L. Livermore (Manhattan) and Thomas Howell (Chicago) loosed an avalanche of wheat and rye that proceeded right through the bottom of the grain market.”

This was one of Livermore’s legendary bear raids when he would unleash wave after wave of short selling on a carefully selected stock or commodity.