Jesse Lauriston Livermore(July 26, 1877 – November 28, 1940) was an American stock trader and considered to be the best and perhaps most tragic Trader in history. His accomplishments, principles and methods inspired many and continue to be studied to this day.
Born into a poverty-stricken family in Massachusetts he showed early signs of greatness. With 3.5years he was able to read and write, in school he excelled at math and other classes. But poverty led his ignorant father to pull the young prodigy from school to work on the farm. With only 14 years he ran away from home with the blessing of his mother in heart and 5$ in his pocket.
Arriving in Boston, he was able to charm his way into the position of a banking company as a board boy. His older appearance and intelligence helped him fool the workers, but they never noticed.
Being tasked with just writing down the telegrammed prices, he noticed that there was no randomness in those numbers.
With 15 he bought his first share at a bucket shop with 5$ and made 3.12$ profit. Everything about market trends so far is self taught by observing and reading the newspapers since he was 5yo.
He continued trading like this and always won, becoming infamous in the bucket shop scene. Within weeks he earned more with trading than with his job. He then had to quit his job, but soon the bucket shops kicked him out repeatedly. To satisfy his hunger for playing, he would don disguises - a beard. Eventually he was permanently banned from bucket shops in Boston for winning too much, but by then he earned a small fortune. He visited his home and presented his family 1000$. His mother disapproved of his "gambling", but he simply countered with
"It is not 'gambling', but 'speculating'".
1899 he decided to test himself and with 10.000$ savings, he moved to New York City to trade at the Wall Street.
There he lost everything, because the price numbers lagged over 30min behind the actual price, hindering his methods.
Defeated, yet still confident in his abilities he moved to St. Louis and began trading at bucket shops again. His infamous reputation followed him even there and he was not welcome. He sent in someone else to trade for him and was able to earn 5000$ that way. Livermore returned to the Wall Street and made thousands effortlessly in the roaring Bull Market at the time. He then lost everything again in trading cotton. Trading more conservatively, he enjoyed life as an attractive wealthy bachelor.
Questioning his own consistency in trading he decided to go on vacation. There, like from a "psychic surge", he decided to short the massively successful Union Pacific Railroad stock and he was considered crazy by friends.
The next day the 1906 San Francisco earthquake happened and their stocks fell. Livermore made 250.000$ with a single legendary trade. Later he decided to switch his position, but a mentor of his urged him to close his position. He was wrong and he lost 40.000$ from his 'tip'. Livermore blamed himself for taking it.
During the Panic of 1907 Livermore's massive short positions made him 1Mio $ in a single day. He perhaps could have gained more, but his mentor J.P. Morgan, who bailed out the entire NYSE that day, requested he would refrain from further shorting. He agreed and bought massive amounts of stocks, which led other traders, who followed his actions to do the same and helped the market to recover. He profited from the rebound and his worth is now over 3Mio $. Within a year he went from 0 to 3Mio.
A phase of private decadence began. He bought a 200.000$ yacht, an expansive car and apartment in New York, visited the most exclusive clubs and had a stream of mistresses.
Years later, against all what he knew, he listened to a famed trader and bought cotton, while they secretly sold - a move that would leave Livermore bankrupt.
But within a year he recovered all his losses.
1915 he filed bankruptcy, but was able to recover yet again by riding the bull market at that time and within a year was worth over 5Mio $.
By the end of World War 1, he had enough money to secretly corner the cotton market (the biggest share, without having the monopoly). His attempt to manipulate the market was foiled by President Wilson himself. Livermore was called to the White House and was asked to sell his cotton at break-even. The president asked why he did that and he just replied
"To see if I could, Mr. President."
That did not stop his attempts and made 10Mio$ by manipulating corn, wheat and a supermarket chain in 1924-25.
His decadent lifestyle continued. He bought an expansive house and let his wife decorate as she pleased.
During that time he had several affairs.
In early 1929 Livermore amassed massive amounts of short positions and hid that fact from the pubic by using over 100 different stock brokers. The worth of his papers were 6Mio$.
His networth would suddenly skyrocket when the Wall Street Crash of 1929 happened. While many lost their livelihood, he made 100Mio$. In todays money around 14 Billion $.
Newspapers blamed him and he received death threats.
In the following years personal tragedies took a toll on his mental health and made his Bipolar Disorder worse, having phases of depression. Additionally in 1934 new rules were imposed that affected his trading process. The same year he filed bankruptcy for the 3rd time in his life.
To this day it is a mystery how his huge amounts of wealth from the '29 crash vanished.
In 1939 he opened an advisory business and a year later wrote his book "How to Trade in Stocks", but it did not do well due to the ongoing war and low interest in the market.
On November 28th, 1940 Jesse Livermore took his own life by shooting himself in the head in a Manhattan Hotel he frequented.
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Originally Posted by RoydGolden
