There are however, significant question marks over Jesse Livermore’s trading record. He bankrupted himself more than once during his career. Then, having made one of the biggest inflation adjusted stock-market coups in history shorting the markets in 1929, he had lost it all by 1934.
Reasonable observers – for the sake of argument I shall include myself in this group – would not try to claim that Livermore was a flawless trader. Livermore is, however, remembered, while most of his trading contemporaries are long forgotten.
Livermore’s continuing fame arises from several significant factors:
- Livermore was a skilled reader of the now defunct ticker tape. In more modern terms, we would say that he was skilled in using price/volume data to predict where a stock’s price was heading.
- Not only did he read the tape successfully, amazingly he told the public how he did it. Trading concepts that we now call support, resistance and momentum can be clearly identified from Livermore’s work.
- The idea of giving up the day job and making a living on the markets is as attractive now as it was in Livermore’s day.
- Livermore stayed in the public eye when, in 1935, following a drunken argument, his ex-wife shot and injured Livermore’s oldest son Jesse Jr.
- Livermore successfully sold the idea to small time traders that they should ride their winners and sell their losers. Although many of them failed to heed his advice for psychological reasons (and continue to fail today, for the same reasons,) even the least educated of today’s traders are aware of this powerful method.
- Livermore lost one of the largest personal fortunes in history. Everything he had taken from the stock-market, he gave back. In the end, just like the bit-players, he failed to obey his own favorite rule – sell your losing trades.
Despite the question marks over his career, even today a trader can make money in the markets using Livermore’s methods. More recent trading gurus – such as Martin Zweig and Alexander Elder – owe a debt to Jesse Livermore for the methods they either use or publicize. There is no other figure in the history of the markets whose methods continue to figure so strongly in market trading than Jesse Livermore’s.