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Who Was Jesse Livermore?
Jesse Lauriston Livermore was one of the best-known traders of the 20th Century.
Even today, he is still being referred as the best. Reviewing his life story and trading system, there are much to learn from his tremendous success, and failure also. Few could accumulate money, or lose money, as quickly as Livermore.
Born in 1877, son of a poor farmer. He was good in mathematic in school and forced by his father to stop schooling in order work in the farm. He borrowed
$50 from his mother and escaped to Boston and worked as a 'board boy' to update stock, bond and commodity prices on their large chalkboard.
As Livermore recorded the ever-changing prices, with his mathematical mind he noted that prices often moved in predictable
patterns. He soon concluded that the markets could be beaten, and that large sums of money could be made.
From the borrowed $50 from his mother, he brought back $1000 from his
market trading gain, to his parents, who were shocked to see so much money.
He was full time trader, learning from his success and failures to build his trading systems. His trade was so huge (win big money and lose big money also) that stock exchange had to ask him to stop trading activities several times.
One of the criticisms of Livermore was that Livermore had only studied how to make money - not how to keep money. In Gann's words "He had the greed and the drive for power, and when he got a large amount of money, he could not trade conservatively. He tried to make the market go his way instead of waiting until the market was ready to follow the natural trend".
During World War I, Livermore anticipated that coffee would have a substantial rise in price, and established huge long positions. His profits amounted to millions of dollars, however the coffee contract was voided. The government believed that he was profiteering at wartime. This bankrupted Livermore for the third time.
Livermore and his family lives were frequently threatened by many investors who lost money, many committed suicides, especially he made $ 100 million during the depression. Many thought that he fixed the market unfairly. (As we discussed further, it was his winning trading system that created the wealth.)
His personal life story mirrors his trading successes and failures. Actually
it was more a tragic life with human values destroyed by huge materialistic wealth – his drink-and- party wife shot
and seriously wounded their son in a quarrel, and Livermore himself took his own life alone in a hotel.
There are much to learn from this legendary man : learning from him his discipline and trading system that makes money, learning to avoid his bankruptcy mistakes and low EQ in balanced family life
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