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9 Lessons from Jesse Livermore

  
  Education
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J-LMUST READThere are those who would convince you that it is somehow smart or in your best interest to be manically switching your investments around, back and forth, long and short, on a daily basis. To pay attention to this kind of overstimulation is the height of madness, even for professional traders.

The most storied and important trader who ever lived, Jesse Livermore, would be tuning these daily buy and sell calls out were he alive and operating today. Because while he was a trader, he was not of the mindset that there was always some kind of action to be taking.

Jesse Livermore’s legacy is a bit of a double-edged sword…

On the one hand, he was the first to codify the ancient language of supply and demand that is every bit as relevant 100 years later as it was when he first relayed it to biographer Edwin Lefèvre. Livermore himself sums it up thusly: “I learned early that 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. I’ve never forgotten that.”

On the other hand, Livermore’s undoing came at precisely the moments in which he ignored his own advice. After repeated admonitions about tipsters, for example, Jesse allowed a tip on cotton to lead to a massive loss which grew even larger as he sat on it – violating yet another of his own cardinal rules.

And of course, other than for a few moments of temporary triumph in the trading pits and bucket shops of the era, Jesse Livermore was not a happy man. “Things haven’t gone well with me,” he informed one of his many wives by handwritten note, before putting a bullet through his own head in the cloakroom of the Sherry-Netherland Hotel.

But he did leave behind a wealth of knowledge about the art of speculation. His exploits (and cautionary tales of woe) have educated, influenced and inspired every generation of trader since Reminiscences was first published in 1923. (more…)

The Greatest Trader Who Ever Lived: Jesse Livermore?

  
  Education
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Seventy one years ago, on Thursday, November 28, 1940, Jesse Lauriston Livermore, entered the Sherry Netherland Hotel where he took a seat near the bar and enjoyed a couple of old-fashioned. After an hour Jesse Livermore got up and went in the cloakroom, seated himself on a stool, and then shot himself in the head with a .32 Colt automatic. How could the man who is still regarded by many as the greatest trader who ever lived go out this way by taking his own life? It just doesn’t match the rest of his life.

In his youth Jesse was know as the “Boy Plunger” because he looked younger than his years and he would take big positions when he traded against the bucket shops of his day. The bucket shops let traders bet on a stock price, but no trade was executed, the house covered if you were right. How good was he? He was banned from the bucket shops one by one, it was like getting kicked out of a casino because you beat the house so badly with outsized gains. He went on to trade in stocks and commodities and did very well becoming a millionaire many times. Unfortunately he also went bust many times. He made his biggest money in the market crashes of 1907 and 1929,  it is said that J.P. Morgan himself sent word asking for Jesse to please quit shorting stocks. In 1929 the day of one of the biggest market meltdowns he returned home and his wife was scared that he had lost everything, he surprised her by making the biggest money of his trading career. He ended up with the nickname “The Great Bear of Wall Street” because of his shorting activity.

Here are some of his most insightful quotes from his book  “How to Trade in Stocks”

“All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope – that is why the numerical formations and patterns recur on a constant basis”

“Successful traders always follow the line of least resistance – follow the trend – the trend is your friend”

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because hu (more…)

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