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Who was Jesse Livermore ?

Course PY100

Jesse Livermore

• 45 years of trading in the stock market in America
• Made $100 million in the great crash of 1929
• Regarded by many as the greatest trader ever lived
• Regarded as author of best seller 'Reminiscences of a Stock operator'

Early Days

1. Livermore - the boy
   1. Born in 1877.
   2. Fond of reading, had a quick mind, aptitude for numbers
   3. At age 14, pulled out of school and sent to work in the fields
   4. Ran away from home to Boston
2. Livermore - the young man
   1. He saw a broker's office in Boston - he knew this was his destiny
   2. He got a job as a chalk boy in the brokerage
   3. Soon, he could detect patterns in price movements
   4. Livermore could eventually detect 2 emotions in the crowd of traders:
   5. Greed & Fear

Sudden Insight

Livermore finally understood the 'secret' of the Market: Do not concern yourself on why things are happening. Only observe what is happening.

Observations in young age

• Majority of traders lose money consistently.
• Traders did not have a plan for trading.
• Hot tips, hunches as a strategy are dangerous

His first trade

• At age 15, he made his first trade in a bucket shop.
• A bucket shop was an unathorised trading centre with low margins
• [In India, this is called Dabba Trading]
• In a year, he had amassed $1000.
• He went home, gave his mother $300.
• When he was 17, he was so successful, he was banned from every bucket shop

Destination: New York

• Livemore went to New York.
• He opened an account with broker E.F.Hutton
• Almost immediately, he lost his entire capital
• He borrowed money from his broker to start trading again
• He was successful beyond imagination.

Live Life king style

• Livemore lived a lavish life style.
• He had many houses, staff, even a barber.
• Owned a personal raiway coach, yatch & Rolls Royce.

Turbulences in a full life

• Livemore developed a trading style that has become a standard for traders
• Yet, he sometimes failed to follow his own rules.
• He was bankrupt four times. Each time he recovered and paid his creditors in full
• A series of tragedies resulted in his suicide in New York, in 1940

Trading Wisdom from Jesse Livermore

• I never buy a stock on declines, I never sell a stock on rallies
• Dont make a trade until all odds are in your favor
• Profits always take care of themselves but losses never do
• Time is not money, time is time, money is money
• Take some money off the table from time to time
• Remember, the clever trader is always patient and has a reserve of cash

Applying Livermore principles to our trading

• Livermore, with Wyckoff & the Dow theorists, forms the foundation of classical technical analysis
• At Technical Trends, we use these classical principles as the cornerstone of our trading
• Our client - only services include newsletters, comprehensive training courses, seminars, specialized software for trading
• We believe that the old masters of technical analysis have laid out a path to success