Jesse Livermore

Reminiscences of a Stock Operator (Edwin Lefèvre, 1923) — the novel of his life — remains the most quoted trading book of all time.

Who he was

Starting at fourteen in Boston's bucket shops reading the ticker tape, Livermore became "the Great Bear of Wall Street": he made and lost entire fortunes several times, culminating in the legendary short of the 1929 crash. His arc contains both lessons: the trading rules he wrote remain current; his inability to follow them — four bankruptcies, ending in his suicide in 1940 — is the most serious warning in the entire literature of the craft.

Contribution

• Tape reading — reading the flow of prices and volumes as the story of operators' behaviour, before modern charts existed.
• Pivotal points — entering where the market proves its direction, at the break of key levels (the ancestor of the operational breakout), not where price "looks cheap".
• Pyramiding — adding only to positions that are working, never averaging down the losers.
• The line of least resistance — the market is to be followed in the direction where it finds fewest obstacles; personal opinion counts less than the behaviour of price.
• Sitting tight — "it never was my thinking that made the big money for me. It always was my sitting": patience inside the right position as a skill distinct from entering well.

What today's students learn from him

1. The market is always right: you trade what it does, not what it should do.
2. His rules survive in the modern concepts: cut losses (stop loss), let profits run, never average down.
3. His costliest lesson is taught in the negative: knowing the rules is not the same as following them — without discipline and risk limits, the best market reader of his century went bankrupt four times.

Study path

Related concepts

• breakout · swing-high-low
• stop-loss · scaling-in
• discipline · patience

Links

• trader
• richard-wyckoff — who observed and interviewed him
• psicologia — where his story is the permanent case study