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What's so interesting About Jesse Livermore?

Time Magazine described Jesse Livermore as the most fabulous living U.S. stock trader.

His progress from office boy to Wall Street legend - his trading lessons - his triumphs and disasters - is probably the most fascinating of any of Wall Street's stories.

Even today, many stock and commodity traders owe Jesse Livermore a deep debt of gratitude for sharing his trading experiences in Reminiscences of a Stock Operator.

The techniques Jesse Livermore made public between the 1920s and 1940s have survived him. This follows from the durability of his basic trading rules - rules that made him millions of dollars, provided he remained faithful to them.

Livermore also lost his entire fortune on more than one occasion, when he ignored his trading rules.

Reminiscences of a Stock Operator

In a series of interviews with "Lawrence Livingstone" (a pseudonym for Jesse Livermore) the financial journalist Edwin Lefebvre got to the heart of the methods and psychology of a master stock market trader. Lefebvre published his interviews in Reminiscences of a Stock Operator. Interviews with Livermore were highly prized because, as far as his market activities were concerned, Livermore was a secretive loner.

The purpose of this site is to discuss and analyze Livermore's experiences and methods in order to provide useful information for today's novice traders.

To give you a brief taste of where we will go, here are some comments from Jesse Livermore himself:

"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 man of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor."

"...the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions."

"There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."

"There are times when money can be made investing and speculating in stocks, but money cannot consistently be made trading every day or every week during the year. Only the foolhardy will try it. It just is not in the cards and cannot be done."

"The point is not so much to buy as cheap as possible or go short at top price, but to buy or sell at the right time."

"I am tired of hearing the public and papers blame Wall Street for parting fools from their money... It's the successful business man who is the biggest sucker of the lot. He has made a fortune in his own line. How? By being on the job for years; by learning all there was to know about it; by taking reasonable chances; by utilizing his knowledge and experience to anticipate probabilities. He wants to increase that fortune at a faster rate and with less effort."

"It took me five years to learn to play the game intelligently enough to make big money when I was right."

"Speculation is far too exciting. Most people who speculate hound the brokerage offices... the ticker is always on their minds. They are so engrossed with the minor ups and downs, they miss the big movements."

The Beginning of Jesse Livermore's Trading Career

Jesse Livermore began his working life at the age of 14, as a quotation board boy in a stockbroker's office. He was, he believed, particularly suited to the job because of his strong abilities in mental arithmetic and number memorization.

Stock prices came into the stockbroker's offices on a ticker tape, a continuous strip of paper bringing the prices from Wall Street. It was Livermore's job to take the prices from the tape and write them on the board for the stockbroker's customers to see. Little did the 14 year old boy realize that, for the rest of his life, his fortunes would be inextricably linked to the tape and his ability to read its message.

Patterns in Prices - The Message of the Tape

As time passed, Livermore began to believe he could discern patterns, or repetitions, in the waves of numbers that flowed each day from the tape. He began to write the numbers in a notebook and tested himself, predicting the direction that different stock prices would take:

"Say that after studying every fluctuation of the day in Sugar I would conclude that the stock was behaving as she always did before she broke eight or ten points. Well, I would jot down the stock and the price on Monday, and remembering past performances I would write down what it ought to do on Tuesday and Wednesday. Later I would check up with the actual transcriptions from the tape.

That is how I first came to take an interest in the message of the tape. The fluctuations were from the first associated in my mind with upward or downward movements. Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn't go into explanations... The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now - not tomorrow. The reason can wait. But you must act instantly or be left. Time and again I see this happen."