Jesse Livermore
Born: July 26, 1877, Shrewsbury, Massachusetts Died: November 28, 1940, New York City (suicide) Fictional name in Reminiscences: Larry Livingston
The greatest speculator of the early 20th century. Livermore made and lost several fortunes, reportedly reaching $100 million (equivalent to ~$1.5 billion today) at his peak in 1929. He is the primary figure in reminiscences-of-a-stock-operator, ghostwritten by journalist Edwin Lefevre from Livermore's own accounts.
Career Arc
Bucket shop years (1890s): Started as a teenage quotation boy at Paine Webber in Boston. Began recording price patterns and testing theories at bucket shops. Eventually banned from every bucket shop in Boston for winning too consistently.
Early New York losses (1900–1906): Arrived in New York confident his tape-reading edge would transfer to real exchanges. Lost repeatedly. The lag in real exchange execution broke his timing, and he had not yet learned the distinction between scalping and trend following.
1907 Panic: Made his first great fortune on the short side of the 1907 panic. His model of studying general conditions — identifying the brewing financial crisis before it broke — was vindicated spectacularly.
1915–1916 WWI Bull Market: After voluntary bankruptcy (1913–1914), rebuilt by going long the war-bride stocks during the Allied-purchases boom. Bethlehem Steel was the key trade: waited six weeks watching the stock, then bought at 98 anticipating the 100 breakout. Rode it to 145+. Turned bearish in late 1916 when former leaders stopped recovering from pullbacks — shorted 60,000 shares across 12 stocks.
1917: Paid off all debts (over $1 million) from profits on the short side of the 1917 market break following Germany's unrestricted submarine warfare announcement. Also took a large loss in coffee (correctly analyzed; defeated by government price controls).
1929 Crash: Made approximately $100 million short. This is his most famous trade. The peak of his career.
Later years: Lost his fortune again in the early 1930s. Declared bankruptcy in 1934. Never fully recovered. Published How to Trade in Stocks (1940). Died by suicide in November 1940.
Trading Philosophy
Livermore's principles, extracted from Reminiscences:
On patience:
"It never was my thinking that made the big money for me. It was always my sitting. Men who can both be right and sit tight are uncommon."
On the line of least resistance:
"Prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline."
On internal enemies:
"The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation, when the market goes against you, you hope that every day will be the last day — and you lose more than you should. And when the market goes your way, you become fearful that the next day will take away your profit — and you get out too soon."
On tips:
"It has always seemed to me the height of damfoolishness to trade on tips."
On self-knowledge:
"A man must know himself thoroughly if he is going to make a good job out of trading in speculative markets."
On the lone hand:
"I have always played a lone hand. That is the only way I know how to play. If I fool myself I alone suffer."
Key Relationships
- Edwin Lefevre — journalist who ghostwrote Reminiscences from Livermore's accounts
- Mr. Partridge ("Old Turkey") — mentor figure; embodied sitting-tight
- Percy Thomas — the man who briefly "Thomasized" Livermore; the persuasion episode
- Dan Williamson — used Livermore's buying as a smoke screen for distribution
- Bernard Baruch — contemporary fellow "lone wolf" speculator on Wall Street
Key Concepts He Developed
- sitting-tight — holding a correct position through all fluctuations
- line-of-least-resistance — prices go where they meet least resistance
- trading-psychology — reversing natural impulses; internal enemies
- pyramiding — scale into winners, never average down
- market-manipulation — how pools work; probe trades; smoke screens
- speculation-vs-gambling — the principled distinction