LEGENDS OF TRADING: THE STORY OF JESSE LIVERMORE


If you were to ask professional traders to
name the people that have influenced their development in trading, you will find very
few people cited more often than Jesse Livermore. This is largely thanks to the part biographical
– part fictional account of Livermore’s life in the famous book Reminiscences of a Stock
Operator, which is usually top of the list of most useful and influential trading books
of all time. However, what’s so fascinating about Jesse
Livermore and what makes him such an amazing person for traders to learn about, is the
polarity of his successes. On one hand, you have someone that has scaled
the absolute heights of success in the market. Someone that we can use as an example of what
you can achieve if you work hard to truly understand the skill of trading and how the
markets function. But on the other hand, within the same person’s
story, you also have clear examples of the pitfalls of trading and how disastrously wrong
things can go if you don’t remain cautious about the markets and if you allow complacency
to creep into your trading. Despite Livermore trading a century ago, his
approach to a large extent is still absolutely relevant today. His approach to trading in
many ways was ahead of its time and his wisdom and observations in many cases are timeless. This is his story. Jesse Livermore was born on 26th July 1877
in Massachusetts. His father was a farmer and his mother was a homemaker.
Jesse learned to read and write by the time he was just 3 and a half years old and by
the age of 5 he was already reading through financial newspapers.
He attended grammar school and, unsurprisingly, was very good with numbers; particularly mental
arithmetic. In fact, while at school he claims that he completed 3 years’ worth of arithmetic
in just 1 year. At the age of 14, under his father’s insistence,
he left school and finished his education. His father who had also dropped out of school
at 14 to become a farmer, wanted Jesse to join him and devote his life to farming.
However, Jesse was devastated by this idea. He wanted to continue with his love of numbers
and arithmetic and to carve out his own path in life.
Due to this burning desire, his mother agreed to help Jesse to run away from home and to
keep it a secret from his father. She sent him packing with just $5 in his pocket,
which would be roughly equivalent to over $100 in terms of today’s money. Jesse got his first job as a chalk boy for
a brokerage firm called Paine Webber whilst he was still just 14 years old.
He had been in the firm looking around and because one of the boys was off sick he was
asked if he could step in. He was soon given a permanent position.
This was an ideal job for him because of his love of numbers. Prices would come through
the ticker tape and be called out. And then he would write them all on the chalk board
for the customers to be able to see. While he was working at this job, he became
so fascinated with the way that prices moved that he started keeping a little notebook.
Since he could clearly remember all the numbers and prices at the end of the day, he would
write these out in his notebook and observe the patterns in the way that they moved. He
kept this as his own little hobby or project outside of his work as a chalk boy. Up until this point, Livermore hadn’t done
any trading as he believed that you needed to have a lot of money to be able to participate.
However, it was whilst working as a chalk boy that he was first introduced to bucket
shops. The bucket shops were almost like betting
shops where you could back a particular stock based on whether it was going to go up or
down without actually needing to invest in the underlying asset. You could do this with
low amounts of money and on very thin margin and the bucket shop would be taking the other
side of your bet. Livermore decided this would be a good opportunity
to test out his work and to see if his theories about prices actually would work out in the
market. He would check his notebook where he had been
recording figures and patterns in the movement of prices and then decide which trades to
play on. Jesse started using his system to play at
the bucket shops on his lunch hour and the first profit he ever made was just over 3
dollars. However, it wasn’t long before he was making more than he was in his day-job,
so he decided to quit this to focus more on his hobby full time. At 15 years old Jesse
had made $1000 from trading at the bucket shops, which is roughly the equivalent to
$25,000 in terms of today’s money. Jesse continued to do well against the bucket
shops by following his own system and one by one the bucket shops began to ban him because
of the amount of money that he was earning at their expense.
He would even have to resort to using a disguise so that he could carry on trading, but word
did get around and eventually everyone at the bucket shops knew who he was anyway.
Eventually he was banned from the majority of the bucket shops in his town. By the age of 20 Livermore had accumulated
his first $10,000. However, this reduced massively by the age of 21 to $2500.
He says that if he stuck with his system, he would make more profits than losses, as
his system would usually win around 70% of the time. However, most of his losses came
unnecessarily when he would not stick with his own system; a problem that a lot of traders
have to overcome at some point in their career. At the age of 21, having been banned from
most of the bucket shops in Boston, Jesse took his $2500 and decided to move to New
York to start trading legitimately at the New York Stock Exchange. In New York it wasn’t long before Jesse gained
a reputation for being a winning trader. But soon after, he lost his money once again.
It seemed his winning formula was only designed for winning at bucket shops and not for the
real stock exchange. He went to St Louis to go back to betting
at bucket shops and to increase his money again. This was a new town for him with new
bucket shops, so he thought they wouldn’t know who he was.
But he did eventually get recognised again, and again he was banned from the shops. Instead,
his solution was to send in people on his behalf. He managed to actually make enough
money by doing this to be able to go back to trading in New York. Although he had already started to make a
name for himself around trading circles, Livermore first became famous for his trading during
the panic of 1907. It was during this time that he managed to earn $1 million in one
day. He made his money by shorting the market as
it crashed. By the end of the crash, he was worth $3million.
At this point, he knew the market was in a bad way and that it was possible for it to
move even more negatively. He had already decided therefore that he would do what he
could to avoid a deeper crisis, when he received a request from the financier JP Morgan, who
was putting together a plan to try to bring the market back to health.
Livermore looked up to JP Morgan, so he was more than happy to help. He began buying as
many stocks as he could, which also led other people to taking the same action. Thanks to
this, the market started to recover and many people that followed Livermore’s lead also
made a lot of money. As a result of this, in some circles Livermore was branded a hero.
But of course, he himself had also acquired a new level of wealth, which meant he could
live in luxury, enjoying things such as yachts and becoming part of the elite, going out
to the most exclusive clubs and enjoying life in the city as a young, rich bachelor.
To keep up with his new expensive lifestyle he turned back to trading. There are certain aspects of Jesse Livermore’s
trading approach that have been well documented. One of the main things was his desire to work
completely on his own. However, in 1908 he broke his own rule of
not taking advice from other people. He trusted a tip from a famous cotton trader.
The cotton trader told Livermore to keep buying cotton, which Livermore did, against his own
instincts. But at the same time as this the trader as well as others were actually selling in
the market, leading the price to move heavily against Livermore.
As a result of this, he lost 90% of everything that he had earned during the 1907 crash.
Throughout the following years Livermore’s losses grew deeper and deeper, until finally
he ended up with a debt of $1 million and had to declare bankruptcy by 1915. Without a stake to be able to begin trading again, he had to ask for some help. He was
offered a trading facility of just 500 shares to get started again. But Livermore knew he
had to play this one perfectly, so he spent 6 weeks just tape-reading in the markets before
finally making his move. The result of this trade was a success and
he finally had a stake to be able to begin trading properly with again.
Unsurprisingly, given the rollercoaster ride that was Livermore’s trading career, over
the next couple of years Livermore managed to earn his fortune back again and pay off
his debts. Newspapers from 1917 report headlines such
as “Boy Plunger Scores Comeback in Operations on Wall Street” and spoke of the shrewd
young speculator who “made and lost millions in the stock market and then came back and
made more millions” In 1922 Jesse Livermore took part in a series
of interviews with Edwin Lefevre for a series of articles. These interviews eventually led
to Lefevre to writing the book “Reminiscences of a Stock Operator” which is one of the most
highly regarded trading books of all time. The book is a ficticious biography of Livermore
and details his ups and downs in life and in investments. It’s thought that the book
could actually be the true story of Livermore’s life based on the interviews, but some also
think it could be completely made up. The book became very popular and is still one
of the most popular investment books to this day It was shortly after this that Livermore decided to move to a new office to have more secrecy
with his trading and to be even more removed from Wall Street. Livermore began noticing certain patterns
occurring in the market leading up to 1929. These were similar patterns to those that
he observed in the build up to the crash of 1907 Feeling confident about the hunch he had, he began opening short trades in anticipation.
At one point he was even living in his office just so he could keep placing trades in the
lead up to what he expected to be a huge negative movement Of course, the boy plunger Livermore was correct and he enjoyed the most successful period
of trading of his entire life. By the end of the crash, Livermore was worth
around $100 million which is over $1.4 billion in terms of today’s money. Most people had
lost their money during the crash, which was known as Black Tuesday. After making it to $100 million after the
crash of 1929, Livermore started to lose that fortune rapidly.
No one knows the true reasons why or how Livermore lost this fortune as it has never been disclosed.
There have only ever been speculations. During this time, things were extremely unsettled
in Livermore’s private life. This included getting a divorce from his second wife, who also went on to shoot his son at a later point in time Livermore had spent time in Vienna and met his third wife, Harriet Metz, whose last husband
had committed suicide. Livermore’s children didn’t like to be around her since they felt
darkness from her and knew that she didn’t want them around, in fact, they even went
as far as to call her the bitch-witch. Eventually Livermore had to declare bankruptcy
again, this was his 3rd time. Although he was bankrupt, he still believed
he could make a comeback as he had done so many times before. But, after all the pressure
and emotional strain of everything that had happened in work and in his personal life,
it was too much to take and he wasn’t able to do it Another contributing factor to not being able to start again on Wall Street was that he now relied on his wife’s money and he had got comfortable He didn’t have the same
drive or passion as he did in his former days. On November 28th 1940, Livermore was found
dead in the cloakroom of the Sherry Netherland Hotel in Manhattan aged 63. He had tragically
shot himself. It’s clear that the story of Jesse Livermore
is one of a highly skilled trader who understood price activity and how to operate successfully
in the markets. This led to some fantastic successes, which we can all learn from as
investors and as traders. However, his downfall in trading was also
due to problems that many traders struggle with. He wasn’t able to avoid being influenced
by his private life and he struggled to stick with his trading rules and system, which would
have helped him to avoid many, many losses. Now many of these rules are still useful today.
They can help us to try to avoid some of the losses Livermore made, while hopefully helping
us to move closer to enjoying some of the success in the markets he did. So here are
some of the rules that you can follow and you’ll also find some books in the description
box for this video that do a good job of detailing Livermore’s trading approach and life, so
we would definitely recommend checking some of those out. I hope you enjoyed this video as much as we
enjoyed putting it together. Jesse Livermore is a true trading icon and inspiration in
many ways. If you enjoyed the video, please do hit the thumbs up button to let us know.
Don’t forget to subscribe to the channel for more videos about trading, the rest of the
trading legends videos are linked below in a playlist so go ahead and check those out.
But before you watch those, please leave a comment below letting us know what your favourite
bit is about the Jesse Livermore story. Thank you very much for watching, we appreciate
it. Take care, we’ll see you soon.

100 Replies to “LEGENDS OF TRADING: THE STORY OF JESSE LIVERMORE”

  1. We hope you enjoy the video. Jesse Livermore is a true trading legend. An icon and (in some ways) an inspiration.
    The rest of the Legends of Trading videos can be viewed here: https://www.youtube.com/playlist?list=PLnLi8MK-orCHPmCVDyA6BN8jdrvqJ1fAr

  2. Assets of only $100k? Thats really bad, if it were me, my first million or so would go straight into high ROI real estate like rentals, commercial property, HMOs etc

  3. great video. very informative. "If you don't get your trading psychology right, you'll never be able to keep your profits." Love the message.

  4. Thank you, please make more. I want to know more pro traders, from historical or real life. Or someone who can tell/suggest some pro traders. Thanks.

  5. Favorite part is Livermore's life was a tragicomedy kinda like mine. He appears to have been like an artist as van Gogh and the likes. One of his pieces of advice at the end is timeless, just what I needed to hear with my current frustration in demo acc. strategies🤣. I just bought the books Technical Analysis by some 2 academics and Trading in the Zone by Douglas and I'm pumped. That was the best documentary I've seen in aeons and it needs a bafta, tout de suite. I had no idea about Livermore so the world is turning for me

  6. This was interesting. I know little about this, which is strange because My father was a lifetime career professional stock trader. But if you had MY perspective & relationship as it was with him it would become much more clear. Now as a middle aged man, not rich but not poor and I'm stable and content – even quite happy these days, because I have real wealth of a different kind. One which cannot diminish as long as I live. And yet I find myself interested more because I love math and patterns. I'm good at it. I can help but think I could have done very well as a trader…but it just didn't inspire me at the right time. That takes a mentor if one is not naturally drawn to it. As for toilet seat (up& down) Jesse… I have found that there is an art & science to making money and there is another for GENERATING wealth…and yet a third for maintaining it. They are 3 connected -related yet distinctly different systems. In any case ONE thing you can be certain and it is this…. Life is better even best…when one is PREPARED. Which simply means ALWAYS invest….in your future.

  7. He resemble the stock market, many ups and downs. But one thing that he doesn't resemble is that he never recovered from his great depression

  8. I really really love his contribution. But let me say this : no true savvy trader is going to let 1.4.billion dollars disappear into thin air… You don't loose that type of money. So right where you hear that, your eye brows need to raised to the maximum.. He was an irresponsible spender. He understood price action and patterns, to prise profits from the markets (70 percent of the time), but he did not understand how to make money compound and create strong reliable.. income steams. He did not want to find out either . He was not a Warren Buffet, Ken Griffin or Ray Dalio.. He was financially educated, and financially illiterate all at the same time.. He was a speculator, not an astute investor or entrepreneur.. . People you see that understand those skillsets compound their wealth..They certainly never lose it. He has a lethal taste in women, too.

  9. He died as a bankrupt man, but he could play the markets.

    He made more than 1 billion which most of the commentators below can only dream off.

    Old habits die hard

  10. Passion and drive are what he lost in the end. which means those were some of the most important traits that won him fortunes. But the wife..eishhhh in Africa we are mostly superstitious and would have hesitated marrying a woman like that..hahaha.. but as his rule says…never trust your opinion until the market action confirms it…it was confirmed that he was never supposed to marry her as he himself eventually did as the wife's ex-husband did..went suicide…..lol

  11. Why no one can avoid from falling on stock market regardless of how much experiences you have or success before?

  12. fantastic video, I was reading alchemy of finances by soros trying to find answers to my operative, great video great information great lessons thanks so much

  13. So his thirds wife ex husband killed himself…… then her new husband, Jesse Livermore kill himself aswell….. weirdd

  14. I was wondering where to trade Forex and Binary Options without using manipulated platforms or which one of trading platforms is the best for work on the most secure way as possible without manipulation. I've heard about Meta Trader V4 to work on Forex trading but I don't know how good it can be about the regard to the subject of manipulation..

  15. You pump up a source where people believe in it , you use the people in this process to develop your agenda then you dump the idea and cash out the profits.

  16. after trading forex 10 yrs, best thing ive taken away from his book that I read 10 yrs back is – time is the most important element in trading, sit tight. good entry, take profit,  limit losses, repeat

  17. All these decades later, we use the same speculative theories lose money. The reason there are wealthy is because others foolishly part with their money.

  18. Really great video team, I appreciate this. Jesse is one of my favorite trader case studies and I only recently found out he shot himself which is pretty brutal.

    I've been thinking about it a lot and why he did that, and I like to think that it's because he was a trading pioneer who was mapping the territory as he went, like any great explorer. He didn't understand trading psychology, risk management and emotional discipline as well as we do now as modern traders. The sad irony is that we modern traders only know about all those important mental health pillars because of traders like him who blazed the way (and died in the process).

    It's easy to ask "Why did he do it?" and be shocked that he repeated the same mistakes over and over and eventually literally capitulated. But that's because it was the 1900s and he didn't know any better. But thanks to him and the internet, we now do.

    Plus it's pretty clear that he attached too much of his personal self-worth with his trading results and net worth, but again – that's something he was (unfortunately) one of the first to learn.

    Anyway thanks again Nick and team!

  19. He may have been successful in the markets
    But his personal life wasn't
    He committed suicide
    His wife shot his son

  20. Livermore committed suicide, his sone committed suicide, and his grandson jesse III committed suicide. That's an even bigger legacy suggesting great wealth doesn't buy happiness.

  21. The bucket shop is the modern day binary options. NADEX is the only legit site ive found for binary

  22. This guy have no emotional stability. How the fuck you lose all your money 3 times ? If he win he win big , but when he lose he lose it all ? That make no sense to me. Why people think he a legend ? Sure he his very good with numbers and prediction of the market but a man who often broke HIS OWN RULES and have 0 money management is not a legend to me . Paul Tudor Jones and ray dalio are legend but this guy is just a human tragedy.

  23. I literally just received a copy of the story of Jesse Livermore today and strictly by chance I stumbled across this video. I look forward to learning some of the pearls that plague so many new and old traders in the markets. What you see is what you get. Thanks for an excellent piece on Jesse Livermore.

  24. Great video, amazing trader. He blew accounts left and right but got back in again. It says a lot about how important psychology, how many people today would get back to trading after losing like him ?

  25. Wall Street was always for cheating: front running, insider trading (Martha Stewart, Ivan Boesky, Bud Fox), high frequency trading scams ("Flash Crash") – still operating – and no chances for common people to do it – so where IS the fair play in stocks????
    SEC = Scam Executives Commission in combo with FED = Fraud Executives of Domestic banks. Any questions left????

  26. I have been trading for just few months. Its been stressful, in gains and in losses. Now I am worried that this shit goes on forever. I might have to take trading as a hobby than anything more than that. Need to enjoy life as well. Good luck people.

  27. you know he loved trading so much that he didn't care about the money he could lose if he was wrong.

  28. He earned 1 billion+ but did not stick to a consistent Money Management. Otherwise, he did everything great in trading.

  29. My favourite bit is that even back in his time it was possible to become a billionaire (in today's money) starting with nothing. With everything we have now (technology, internet, money, …) this must be very possible to achieve!

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