Jesse Livermore: All his best secrets!

Famous traders

Jesse Livermore

If you ask professional traders to name people who have inspired and influenced their development in trading, Jesse Livermore will be cited more than anyone else. He was a legendary trader, a big player in the market, and a Composite Man. His life is full of signs of brilliance, excesses, scandals, bankruptcy, money, success, and failure. 

  • Jesse Lauriston Livermore is a legendary trader known as “the great bear of wall street”.
  • Traders remember many of his quotes.
  • Many consider him to be the greatest known trader.

A brief story of Jesse Livermore’s life

Early age

Born in 1877 to a family of farmers, Jesse Livermore was the youngest of three children of his parents. His mother was determined to teach him the “finer things in life” but his father paid him no attention at all. But he was a surprise kid who learned to read and write at the age of just three and a half years. He used to read newspapers and keenly study the financial pages by the age of five. His father pulled him out of the school when he was fourteen to do farming but Livermore had set his eyes elsewhere. He left home to make his own destiny. 

Jesse wasn’t made to work a job

His first job was as a Paine Webber board boy on $5 per week. Being determined, keen, and bent on making a successful trader, he started to learn about market trends. He bought his first share and earned a profit of $3.12 from $5 when he was just 15. He used to track the ticker numbers and concluded that there was nothing random there. Jesse left his job a year later and became a thorough professional trader at Boston’s bucket shop. He always won there and made a fortune of $10,000. But he caught the attention and was permanently banned from the Boston’s bucket shop.

Then we moved to New York

In 1899, he went to New York and got married but didn’t know a misfortune was imminent. He lost everything by the ticker’s number. Defeated yet confident enough to go back to basics and make a fresh start, he hired a helping hand who would trade at St. Louis bucket shops on the behalf of Jesse Livermore. He made $5000 there and moved on.

Livermore’s next destination was Wall Street. He started trading there in 1901 and had earned a $50,000 fortune by the age of just 24 years. By the age of 28, he had a whopping fortune of $100,000 fortune to his name. However, he was a bit short at confidence back then and decided to take a break. He decided to short the Union Pacific stock and went to Palm Beach for vacations. 

Making money was systematic for him

During that time, the Union Pacific stock was always going up and Jesse Livermore made $250,000. San Francisco’s earthquake caused the market to fall. Later on, Livermore earned the largest sum of $1 million in just one day during the crash of 1907. His net worth rose to $3 million and his lifestyle became too lofty to maintain. Another misfortune was waiting for him when his dear friend Teddy Price betrayed him while trading cotton in the Chicago commodities market. Teddy advised Livermore to continue buying while he himself sold and as a result, Livermore lost everything. 

The inevitable bankruptcy in 1915 lasted not long and a year later, he made $5 million by capitalizing on the bull market. He had become a famous trader, was in the media, and other traders started following his suggestions. His wealth was growing but his family life was deteriorating because of his own habits and his wife’s. He divorced his second wife as well and went on vacation again but he was forced to declare bankruptcy again. It was the time of a second comeback. 

However, his third wife’s wealth supported him and he never felt an urgency to start trading. He published his book, “How to Trade in Stocks,” in 1940. Unfortunately, in the same year, the great Jesse Livermore shot himself. He was depressed and broken by the family misfortunes and tragedies. He left nothing for his children. Although his money didn’t last his wisdom did and had stayed with generations of traders. His successes are inspirations and his failures are lessons for today’s traders.

What did Jesse Livermore teach the traders of the next generations?

The following are some of the key lessons that Jesse Livermore taught the traders of the next generations.

Reading prices like Jesse Livermore

The critical aspect of Livermore’s trading was learning how to read prices. He taught how to identify the opportunities, observe price behaviors of an instrument, spot opportunity times to enter a trade, etc. He himself spent the early days observing, learn, and remember the movement of prices. Jesse learned everything about the behavior of prices and price actions. He filled his trading journals and keenly studied them endlessly. He wasn’t an adventurer to make wealth overnight rather an opportunity seeker who waited for the best opportunities and traded them. When he went to Wall Street, he spent years analyzing his system because he had failed the first time. So, patience and learning to read prices was the first lesson he taught to traders of the next generations.

Persistence

Jesse Livermore had to pass through troubled family life and several financial crises. Yet, he came back strongly because he was persistent and resilient. He never gave up. He observed more keenly, studied harder, refined his systems with more care, made fewer mistakes gradually, and learned greatly from his failures. It takes resilience and persistence to trade and be patient against the losses, humiliations, and setbacks and Jesse Livermore practically taught this lesson.

Wait for the right opportunities and make bold moves

Surprisingly well enough, during the 1907 and 1929 crashes, only a few traders were successful and Jesse Livermore was one of them. He made great fortunes during that time just because he used to wait for the right opportunities and made bold moves. Jesse was so patient that he used to wait even more than a year for the right opportunity. He always waited for the right time and signals telling him to enter the trade. That is the rule of success in trading and again, Livermore was the one who taught this through his own trading style.

Jesse Livermore’s trading rules

The mighty trader of the trading history, Jesse Livermore, created certain trading rules, given below, that is valid today even after a century. The rules are valid today even though a century has elapsed because the market has a tendency to repeat itself and Livermore told this truth as he said:

“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.”

  • Trading with the trend is Jesse Livermore’s way of trading. Buy in the bullish and sell in the bearish market.
  • Wait for the right opportunities to fall for you and don’t engage yourself when there is ambiguity. 
  • Patience is the key to success. Be patient and wait for the market to confirm the sentiment before entering a trade.
  • Deal in a few stocks.
  • Trade with a stop-loss in place and be sure about it before entering a trade.
  • Don’t wait to exit a position once the chances are remote for making further profits.

However, it takes time to learn and in trading, it takes longer than usual to learn as Jesse Livermore said himself:

It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market and it is not the bull side or bear side but the right side.

You may find other quotes from him on our trading quotes page. It lists all the best quotes from the best traders and investors.

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