"Jesse Livermore Was a Speculator
Like No Other - Before or Since. 
He Made Fortunes.  He Lost Fortunes."

"But, The Principles of Jesse Livermore
Were Based on Sound Principles.
It Was His Exection That Was Hapless"

Introduction

Jesse Livermore was born the son of a poor farmer in 1877.  He learned very early on in his life that he didn’t want to work for a living and that speculating in stocks and commodities was the way for him.

So, as a  precocious 14 year-old he set out to make his fortune in “the game” of stocks and commodities. He started in the "Bucket Shops" and progressed from there.

What made him arguably the world’s greatest ever Stock Market trader was the sheer scale of his holdings.  In the 1930s he had controlling interests in both IBM and Philip Morris plus several others.

"Jesse Livermore - The Ultimate Speculator"

Livermore hated rumours and tips, and rarely visited the companies in which he invested.  But….he had a remarkable capacity for recalling facts and figures about industry trends,
company news and statistics. 

Livermore succeeded on the scale that he did by fully committing all his funds to what he thought was right and he even leveraged his positions further after that.

His pastimes were fishing and sailing, and he would regularly  disappear to escape from adverse market conditions or if the Markets moved against him.

In 1929, the year of the Great Crash, Livermore was heavily short of the Market and some even blamed Livermore for starting the Crash.

Although he did make one useful observation at that time and it was this:  many stocks were selling on high P/E ratios compared to, say, US Steel which was priced at just 8
times earnings at the peak of the 1929 Market.  But, US Steel went on to lose 90% of its value during the following 3 years, which provides one argument against P/E ratios being a good guide to stock performance, at least, in isolation.

Jesse Livermore was a self-proclaimed non technical analyst.  However, there can be little doubt that he traded roughly according to technical rules.  It could be that his ability to retain figures meant that he had some sort of mental chart going on in his head.

Perhaps if he had used charts he would have avoided the massive losses that he made when the Markets went against him, but there again, he probably wouldn’t have made the colossal gains either.

Livermore died a tragic death in 1940 by committing suicide.   He went heavily short on grain just before the outbreak of World War II.  He firmly believed that war could be avoided and traded accordingly.  This turned out to be one big trade too far.

However, if you study the trading methods of Jesse Livermore it will lead you to a better understanding of the markets and hence, lead you to better trades. 

It is not proven, but a book written by Edwin LeFevre is widely believed to be a thinly disguised biography of Livermore.  Whether it is or it isn’t a true biography, you will still learn so much from this manuscript about how the Markets work.  
  
To wrap up, here are half a dozen of Livermore’s trading axioms:

1. Always take a small loss.  Holding on to a losing position is what does the damage to the pocketbook and it aps the confidence next time you want to deal

2. The big profits are in the big swings in the Market which arethe results of the fundamental changes in Market conditions.  Always trade with the trend.

3. Stocks are never too high to begin buying or too low to begin selling.  But after the first transaction never add to the position unless you are in profit.

4. The way to make big profits is to be right at the right time.  This means that by studying the timing of entry into the Market carefully, the most profit can be made most easily.

5. Patience is what makes the big money.  Being patient before you enter the Market and then being patient once in the Market is one of the hardest lessons to be learned but it is one of the most valuable of all.

6. A man must profit by his own mistakes.

"Books By and About Jesse Livermore"

How To Trade in Stocks by Jesse Livermore

Click on the link below to access:

Reminiscenses of a Stock Operator by Edwin Lefevre

Click on the link below to access:

Two Books of Market Wisdom by Jesse Livermore

Click on the link below to access:

Conclusion

Jesse Lauriston Livermore was an out and out speculator. 

This website is all about conservative investing, not speculating.

We have included Jesse Livermore, and books about him, because his methods are worth studying.  His analytical techniques were sound, his gung-ho, everything in one basket,  attitude of investing all or nothing leaves a lot to be desired.

We agree with Warren Buffett.  Divide your pot into 10 or 20 lots and only commit one unit of investment per share.  That way, if one ivestment does go sour, you are still left with the remainder.

Jesses Livermore put all of his eggs in one basket.  It proved fatal (literally).

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