Valuable Investing Advice from Jesse Livermore
Jesse Livermore was born on a farm in Massachusetts, on July 26 1877. He was trading by the age of 14. Early family history is not clear, but it appears his father was a hard master and wanted Jesse to say on the farm. But he had his mother’s blessing to leave.
He worked for a broker in Boston and in his spare time started trading at illegal bucket shops. A bucket shop takes bets on stocks but does not necessarily buy them. He was very successful and was eventually banned from most shops.
He moved to New York and started legitimate trading of stocks and commodities. He made and lost several fortunes with his most spectacular trade being a large short position just before the 1929 crash. He made a profit of $100 million. At the time many important players, such as JP Morgan, considered that the crash was due in no small part to Jesse’s trade.
Jesse died by his own hand in New York on November 28 1940, at the age of 60. His third wife at the time of his death was Harriet Noble. It was her fifth marriage. It is bizarre, and perhaps suspicious, that all five of Harriet’s husbands committed suicide.
Jesse Livermore at the Breakers Hotel, Palm Beach. Image from “How to Trade in Stocks”.
The two best books on Jesse Livermore are:
How to Trade in Stocks by Jesse Livermore. First published in 1940 by Duell, Sloane and Price. Copies of this original work are expensive collectors’ items.
A current version, with commentary by Richard Smitten, is available from The Book Depository here.
Reminiscences of a Stock Operator by Edwin Lefèvre, Wall Street journalist. First published in 1923 by G.H. Doran. The Forward of recent editions of the book is by noted financial journalist , Roger Lowenstein. Lowenstein notes that that even though the book is written in the first person, Lefèvre states that it is based upon weeks of interviews with trader Larry Livingston. Livingston was the nom de guerre of Jesse Livermore.
Jesse Livermore later stated that he had actually written the book and Lefèvre had acted as the editor. There was also speculation that the two men collaborated on “information gathering and dissemination”.
A current version is available from The Book Depository here.
Jesse’s favourite book was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. This is a must read on market psychology. Get a copy from The Book Depository here.
Trading Advice from Jesse Livermore
Read the books for a complete guide to this amazing man’s techniques. I have found the following advice invaluable.
- Trade alone, do not take advice. Trading, or speculation, is a solitary profession.
- Start a trade small and add to it if things go the way you expect. Sell-out if they don’t.
- Have patience, do not trade for the sake of trading. If you do not see opportunity, do nothing.
Jesse believed that serious losses are the best teacher and I have certainly had that lesson taught more than once.
To finish, my favourite Livermore quote:
“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor. ”
Shows the many opportunities for failure.