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The Life of Jesse Livermore

This episode is the kickoff of a new series where I’m going to talk about the life of trading legends. I’ll talk about their history, share some research, and study some of their trading techniques. What can we learn from their life? How can we apply it to our lives and trading?

In this first edition, we’re going to look at the life of the famed Jesse Livermore. Where did he get his start? How did he find success? How can we learn from his life? Don’t miss this episode of How To Trade It!

This week I kick off the trading legends series by talking about the life of Jesse Livermore—and what traders can learn from him! #stocks #trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet

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You’ll want to hear this episode if you are interested in…

  • [0:38] The trading legend series: Jesse Livermore
  • [2:06] How Jesse Livermore got started trading
  • [16:32] Lessons that Jesse learned
  • [23:22] The techniques that are credited to Jesse
  • [25:02] How Jesse’s story ended
  • [27:22] A challenge to my listeners

Jesse Livermore’s humble beginnings

Jesse Livermore was born July 26th, 1877 to poor farmers in Massachusetts. He learned to read and write at 3.5 and excelled in his studies. His mother knew he was destined for great things. But schooling wasn’t important for farmers, and he was pulled out of school to help on the farm. But his mother knew he wouldn’t be a farmer. So she helped him run away from home. She wanted to help him accomplish something great. When someone you care about really believes in you, it changes your future. We need to invest in people the same way.

Jesse landed in Boston and started a job at PaineWebber, making $5 a week. It was his first exposure to the stock market. He started to notice patterns and understand how prices moved. He developed a strategy at 15 years old. He couldn’t buy stock on the open market, so he traded in a bucket shop. It was highly leveraged and unregulated. They’d take bets on stocks. A small movement in price could provide a large win—or huge loss. He risked $5 on his first trade and made $8.12, a 60% ROI.

Where Jesse found success

As Jesse went on, he found more success. But he outgrew the bucket shops and had to go to Wall Street. It wasn’t as easy as it was in the bucket shops. His strategies just didn’t work the same. He lost everything. He went back to the bucket shops—but they wouldn’t let him trade. So he ended up going to St. Louis. Over the next 20 years, he built his wealth. In 1901, he had a big win. He turned $10,000 into $500,000 by going long on railroad. That’s over $1 million in today’s money.

He worked for 20 years to become an “overnight success.” You have to keep on grinding, adjusting, and focusing on your goals. You will hit your success story if you keep moving forward. He had another great trade in 1906 when he shorted the market before a major Earthquake, which made the market drop. He made another $250,000. After 1906, he made another $1 million in a single day. It’s rumored that JP Morgan himself asked Jesse to stop short-selling. So he started to buy stock. He made $1 million on the shorts and $3 million on the upswing.

How did Jesse Livermore find success in the stock market? What was his downfall? Hear his fascinating story in this episode of How To Trade It! #stocks #trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet

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Jesse’s turbulent trading journey

During this time, Jesse was having personal problems that carried over into his trading. He found himself a constant target. Teddy Price convinced Jesse to buy cotton while Teddy was going short. It was a trap that bankrupt Jesse. He lost everything on that one trade. Imagine the emotion behind this. But he forged ahead and kept moving forward.

By 1950, he was bankrupt again. So he started making rules. He decided to take care of his family first and put money in a trust that couldn’t be risked in the stock market. He also decided to stop trusting people’s advice. Yes, it’s okay to listen to what others are saying and learn from them. But following a blind pick is never a good idea. You have to educate yourself.

He started taking small positions and seeing if it worked. If it did, he’d increase his holding. In that way, if you take a small loss, you wait for the timing to be right and get in later. This is what’s now known as pyramiding.

In 1929, Jesse felt like the market was in trouble. He noticed it was making big moves up, but felt like it was going to reverse. So he shorted the market with his pyramiding technique, a play that was risky and dangerous. Your timing must be perfect. Initially, he had lost a lot—almost $6 million. But the crash that led to the great depression hit. By the end of the day, he had made $100 million—when everyone else lost hundreds of millions.

An unfortunate end to an extraordinary trading life

Jesse’s notoriety took a turn for the worst. The public blamed him and sent him death threats. His mental health started to decline. He experienced massive highs and massive lows. The SEC changed some rules that he found difficult to adjust to. He experienced a 3rd bankruptcy, which really took a toll on him.

Jesse was married three times. His second wife sold his home that he has spent $3.5 million building for $222,200. He suffered through a lot of depression. On November 28th, 1940 he shot himself in a New York City hotel, nearly bankrupt. He was a victim of the market because the valleys were more than he could handle.

What trading techniques were credited to Jesse and are still used today? What can we learn from his turbulent and infamous life? Listen to the whole episode to learn more!

What techniques and strategies did Jesse Livermore invent that we still use today? What can we learn from the ups and downs he faced? Find out in this episode of How To Trade It! #stocks #trading #StockMarket #Investing #DayTrading #StockPicks Click To Tweet

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Disclaimer: Trading carries a high level of risk, and may not be suitable for all investors. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment. Therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.