Jesse Livermore: A Remarkable Trader To Learn From

Last Updated on September 19, 2021 by Alphaex Capital

If you haven’t heard of Jesse Livermore, where have you been?

Don’t worry because in this article, we’ll get you up to speed and you’ll see why you need to learn from his lessons.

Any serious trader should read and consider the lessons he left behind.

So let’s check it out below:

Who was Jesse Livermore

Jesse Livermore, born in 1877 and died in 1940, was a trader that taught the world about basic psychology through trading the markets.

He wrote two books outlining his trading philosophy: “The Art of Trading” and “How to Trade In Stocks“.

Jesse had an incredible life with many upsets but he managed to bounce back from all of his losses. Jesse Livermore is well known as the man who made $100,000 in one day on his trading account … but lost it all too!

Jesse went bankrupt several times throughout his lifetime but always bounced back stronger than ever before as a result of learning from each failure.

Jesse Livermore was also known as “the boy plunger” due to his aggressive stock market investment style which made him millions!

Yet became one of the wealthiest people in America at that time on account of his stock-market speculation.

Jesse Livermore knew how to identify market patterns and could tell when the public mood was shifting.

Jesse’s trading strategies were based on his understanding of human psychology, which he developed by observing traders during volatile economic periods such as the Great Depression.

He also made a fortune through stock-market speculation before declaring bankruptcy for the second time in 1938 due to margin calls from brokers who had loaned him money with interest rates that increased sharply after stocks crashed following Black Tuesday on October 29th 1929.

Jesse then turned around again only months later thanks to some savvy trades where Jesse was able to identify that stocks would recover.

Jesse Livermore died in 1940 and never recovered from the Great Depression, but his lessons are still very much alive today with traders all over the world.

Jesse’s trading philosophy could be summarized by two phrases: “Don’t speculate unless you’re sure” and “Cut your losses quickly.”

In his books, he emphasized that speculation should only occur if one has enough knowledge about economic trends or sentiment which Jesse developed after years of experience himself.

Jesse Livermore inspired many traders today including Warren Buffett with his understanding of human psychology which he developed by observing crowd behavior during volatile economic times like the Great Depression or Panic 1907.

Jesse made a fortune on Wall Street trading stocks that were then considered worthless because they didn’t meet even basic standards for valuation at that time (i.e., AT&T).

Jesse’s lessons for traders are:

– Know your market intimately

– Develop a sound and logical system that fits you

– Trade with discipline to follow this system without deviation or hesitation

– Create emotions by managing expectations of both profits and losses

What did he trade and how did he make his fortune?

Jesse Livermore traded primarily on the stock market from 1900 to 1940.

Jesse made a fortune during volatile economic periods such as the Great Depression, Panic of 1907 when he bought companies like General Electric and Radio Corporation Of America who had fallen into crisis mode or suffered massive losses.

Jesse knew how to identify these types of stocks before others did.

However:

He was not perfect.

Jesse also went bankrupt twice but managed to recover both times through careful management and knowledge about how people think when markets are unstable or falling into crisis mode.

Jesse’s trading strategies were based on his understanding of human psychology, which he developed by observing traders during volatile economic periods such as the Great Depression.

Why are traders still fascinated by him today?

Jesse Livermore is often credited for being among the first investors or speculators to make a fortune off of investing during turbulent times.

The fact he made over $100,000,000 at his peak, which equates to $1.5bn in today’s money gives many traders hope that his strategies work and will do the same for them.

Key lessons to take away from reading about his life :

  • “Don’t speculate unless you’re sure”
  • “Cut your losses quickly.”
  • You must follow the price and let the market dictate your actions
  • Keep your profitable trades open until there is a logical opportunity to exit the trade.
  • Trading losses should be kept small
  • Trading must be avoided when there are no clear trades available to take.
Jesse Livermore Lessons

Jesse Livermore’s lessons for traders are

– Know your market intimately

– Develop a sound and logical system that fits you

– Trade with discipline to follow this system without deviation or hesitation

– Create emotions by managing expectations of both profits and losses.

Jesse was very disciplined in following his trading rules, even when faced with setbacks like the Great Depression.

He knew how the markets functioned during different periods which gave him an edge over other investors who didn’t understand these trends as well as Jesse did.

Jesse Livermore’s lessons live on today with traders all over the world who have learned from his teachings, even though Jesse died in 1940.

His most famous trade – the “Boston panic”

The “Boston Panic” is where Jesse read about a large bank failure.

Jesse knew how people would react to this news and saw an opportunity for profit, so he bought stocks of companies like General Electric which were on the rise after investors learned that they had not been affected by Boston’s Bank Crisis.

Jesse was right because GE soared over 40% just two days later as panic spread across Wall Street with other stock prices following suit including Radio Corporation Of America (RCA).

Jesse then sold all of these stocks at their peak making huge profits from a single investment – something most traders today could never do without Jesse’s experience and expertise.

What can we learn from his trading style?

His trading style consisted of monitoring volume traded and breakout opportunities using market highs and lows, combined with the use of his version of a pivot point.

Jesse Livermore’s pivot points were calculated between market highs and lows.

Jesse would then use these pivot points as a guide to trade stocks on the NYSE, which he noticed traders were buying or selling at certain levels of volume for short periods of time.

The importance of keeping a diary and learning from your mistakes

Jesse Livermore’s style of trading was based on what Jesse called “playing safe”.

Jesse knew how people acted in times of crisis and traded accordingly.

Jesse also learned from his mistakes which is why he kept a diary to track the days, weeks, and months ahead so that if there were any patterns or trends emerging Jesse could take them into consideration before making an investment.

What can we learn from him today?

The lessons Jesse left behind are still applicable today with traders all over the world who have learned from his teachings including those who came after him like Bruce Kovner for example.

Jesse Livermore is an example for every trader to learn from because he has managed to achieve so much and still share his knowledge with others.

His advice can be applied by anyone looking to invest in anything – stocks, forex, or commodities as long as they understand risk management and how people think during different market times based on their experience which Jesse had first-hand knowledge of thanks to his failures early in life where he didn’t stop trading even when the odds were against him.

Jesse was also an excellent teacher because he shared his knowledge with others despite that this type of investing is not for everyone and can be very risky at times.

There are many lessons to take from Jesse Livermore’s trading career.

One of the most important is that you should be prepared for volatility and don’t panic when it occurs.

When he traded, he would never let his emotions get in the way of executing a strategy; instead, he executed with discipline until an opportunity came back around again.

If you found value in this article, please share it on social media so we can help more people learn about these valuable lessons!

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