Updated: May 25, 2021

Jesse Livermore - The Life of a Stock Trading Legend



Legendary trader Jesse Livermore, arguably the most influential stock trader to have lived within the last century.

Few stock trading books have had the influence and lasting popularity as this trading classic – Reminiscences Of A Stock Operator.

Written almost 100 years ago this book is just as relevant now as it was then.

In this video we provide insight into Livermore’s life, his stock trading beliefs and how these beliefs translate toward the modern-day trader.

Jesse Livermore lived in the age of telegrams, ticker machines and manually updated quote boards. Not forgetting huge commission costs.

A century later we now have smartphones, instant information from the web, high frequency trading and just about any set of data you want to see to make an educated investment decision. Therefore, you would not be alone in thinking this book should be obsolete…

But Livermore himself points out, people do not change. The same forces of fear and greed are still evident today. People will try all sorts of trickery to get your money, some resorting to desperate measures.

The message being that the emotions of people towards money remain the same as they did many years ago, the same emotions that move the markets today.

Livermore was always fascinated by the markets and spent much of his time in the bucket shops of New England trying to understand them. He soon developed a skill of being able to read the tape and to help him remember the patterns for each stock, he would write his theories into notebooks.

Soon after he realised he was able to predict the movement of a stock based on its previous price pattern. It was not long after at the age of just 14 he placed his first trade and became a fulltime trader.

Livermore had a quantitative approach to price action which will be familiar to most modern-day traders. Initially he was a pure technical trader and his system gave prediction to the short-term movement of stock prices, however his style of trading developed further over many years whilst continuously studying the markets.

At the age of 21 through his trading success, Livermore amassed the equivalent of $686,000 and was subsequently banned from the bucket shops. This led him to the proper brokerage accounts in New York, where he knew his price action system could beat the markets.

He was soon to realise however that his system was not profitable outside of the bucket shops. The transaction costs and delays of the brokerages meant that he was not able to buy or sell quickly enough as he could before.

He continued trading in New York but before the end of the year, compounded by the excessive use of leverage, his trading account slowly declined, he was eventually wiped out and declared broke…

Livermore later said;

“The game taught me the game. And it didn’t spare the rod while teaching.”

Despite his losses Livermore knew his scalping strategy worked in the bucket shops due to the favourable transaction costs and quicker speed. He later travelled to St.Louis, and under a false name he began to rebuild his account.

After once again making a considerable amount of money in the bucket shops, he decided to test his luck again in New York where he knew real wealth was possible.

During his second bout in New York Livermore made several wrong bets which again almost wiped him out. He refers to these losses as tuition fees and says:-

“There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win”