Background
Jesse Livermore (1877-1940) is arguably the most famous speculator in history. He made and lost several fortunes, famously making $100 million (equivalent to $3 billion today) shorting the 1929 crash. His biography, 'Reminiscences of a Stock Operator,' is considered the greatest trading book ever written and is required reading at most Wall Street firms.
Core Methodology
Livermore's approach centred on identifying 'pivotal points' — key price levels where the character of the market changes — and concentrating positions when the market confirmed his thesis. He was a momentum trader before the term existed: buying strength and selling weakness, adding to winners, and cutting losers quickly. His tape reading skills allowed him to detect institutional activity by the behaviour of price and volume.
Key Trading Rules
- Trade in the direction of the dominant trend — never fight the tape
- Wait for 'pivotal points' — key levels where the market tips from one condition to another
- Add to winning positions as they prove correct — pyramid into strength
- Cut losses immediately — 'The market does not beat them. They beat themselves.'
- The big money is not in the individual fluctuations but in the main movements — position for the big swing
- Be patient: 'There is a time for all things — a time to go long, a time to go short, and a time to go fishing.'
Key Concepts
Books & Resources
Reminiscences of a Stock Operator by Edwin Lefèvre (Jesse Livermore's thinly-disguised biography). How to Trade in Stocks by Jesse Livermore. Jesse Livermore: World's Greatest Stock Trader by Richard Smitten.