Jesse Livermore – market legend.
Not with us anymore. Killed himself in a bout of depression.
Jesse’s life will be remembered. He was a pioneer, establishing the basic rules of trading for modern mankind. In the process he won many fortunes, and lost back a big part of what he won because of the hit and trial process he had to go through, to establish a basic trading map for mankind.
His was a colourful life. Pioneers, however, cannot be judged by the average person. An average human being doesn’t have the powers to comprehend the conditions under which a pioneer functions.
There were times when Jesse would swing a leveraged line worth several million dollars, and this is the first quarter of the 20th century we are talking about. He established the need and the rules for a stop-loss by losing money big time. He also won big, very big.
Jesse was the king of shorting. In the mega-crash of 1929, his unswerving short line won him a 100 million dollars. In 1907, JP Morgan (the man, not the investment firm) personally requested him to square off his shorts asap, or the US financial industry would go bankrupt. Jesse loved America, and the American way of life. He squared off his shorts.
Jesse had an eye for big market moves. He would watch a stock and get into its nervous system. Then, he would preempt its big move and would make a killing. He observed that stocks fulcrum around pivotal points, shooting up or down many notches from there within a short span of time. Making use of this insight was not enough for Jesse. He shared his knowledge with the world, so that others could benefit.
Then, another very lucrative trading insight – buying above highs – comes from Jesse. People are making serious money today in Gold and Silver for example, using this very knowledge. Others have used this strategy to their advantage by latching on to the runs of Cisco Systems, Walmart, Wipro etc. in the past. Above a high, there is no resistance, coz there is no presence of old buyers wanting to sell. Jesse was the first to recognize this.
In the early part of life, JL was impulsive. He would lose everything he made by not sticking to his own principle of stops, for example. Later, as he matured, he developed the principle of letting a winning trade run. His way of putting it was that the biggest money in the markets was made by sitting.
In his later years, Jesse started treating cash as king. When the opportunities would come, JL’s line with the bank was as deep as the pockets of Fort Knox.
I’ve shared four principles with you which Jesse Livermore actively used in his trading. These principles are priceless. I admire Jesse Livermore, and wish that he hadn’t fallen to the disease of depression.
Thanks so much, Jesse.