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Jesse L. Livermore was a famous stock trader in the early 20th century.

Although he had no formal education, he entered the working world at the age of 14. Known as a Wall Street legend, Livermore had a profound impact on generations of stock and commodities traders.

Livermore is the author of "How to Trade Stocks" and "My Life on Wall Street" as well as "How I Made Fortune Three Times in the Stock Market."

Jesse L. Livermore committed suicide on November 28, 1940. [1]

Key Points

• Jesse L. Livermore was a famous stock trader in the early 20th century.
• He started working at Penn Webb when he was 14 years old.
• Livermore's experience was detailed in "Reminiscences of a Stock Trader" by Edwin Lefebvre.

Early life and education

Jesse L. Livermore was born on July 26, 1877, in Shrewsbury, Massachusetts. Due to his poor family, Livermore only attended elementary school.

At the age of 14, he joined the Penn Webber Company in Boston as a note-taker, responsible for recording stock exchange prices on paper tape and copying them on the blackboard.

Stock Trader

In his book, "Jesse Livermore: The Man Who Sold America Short," Tom Rubesum describes Livermore as a trader with both the biggest single-day profits and biggest single-day losses. Between 1900 and 1940, Jesse Livermore made and lost fortune three times. Livermore buys and holds stocks during bull markets and sells when market momentum changes. His strategy was particularly precise considering that at the time the company did not publish financial data or conduct fundamental analysis.

At the age of 15, Livermore made his first trade with a profit of $3. [1] At the age of 16, he quit his job at Penn Webber and began trading independently. Trading at the time was mostly conducted at speculative firms, where clients used high leverage to gamble on stock prices. When barred from Boston's speculative firms because of his continued success, Livermore moved to New York City. [1]

Wall Street Shorts

Jesse L. Livermore earned a reputation on Wall Street for predicting market crashes, earning the nickname "The Wall Street Short." [2] Two of his famous transactions occurred during the financial crisis of 1907 and the early days of the Great Depression.

As the market bubble of 1906 expanded, Livermore followed the trend until his gut told him to look elsewhere. In one famous trade, he shorted Union Pacific stock due to an earthquake in San Francisco and made a profit of $300,000 in two days. When the market crashed in 1907, Livermore followed J.P. Morgan's advice and bought when others were selling. Other traders followed suit, and Livermore is credited with playing a key role in the market's early recovery. [3]

By 1929, Livermore was in a good position in the stock market, but he began to look for the first signs of market weakness as another market bubble was approaching. In several small trades, Livermore sold his long positions by probing the market for short bets, resulting in a loss of nearly $250,000. However, Livermore continued to build short positions, and on "Black Tuesday," October 29, 1929, he reportedly made$100 million shorting the Great Depression. [3]

According to reports, Livermore's wealth at his peak was equivalent to $1.5 billion in today's money. He traded freely and unregulated until the creation of the Securities and Exchange Commission (SEC) in 1934, which marked the end of Livermore's era. [4] By 1940, Livermore was bankrupt.

Who did Jesse L. Livermore influence?

Referring to Livermore's experience, William J. O'Neill, founder of Investor's Business Daily, said: "In my 45 years in the industry, I have only found 10 or 12 books of real value, and 'Memoirs of a Stock Trader' is one of them." Today, many people in the market know Jesse Livermore through an anonymous Twitter account of the same name, which discusses and advises Livermore's trading strategies.

How did the White House influence the Jesse L. Livermore deal?

In an unregulated market, Livermore manipulated the cotton market after World War I. He established cotton positions through brokers around the world, and within 18 months he owned most of the U.S. cotton. President Woodrow Wilson had asked Livermore to sell his strong position to avoid harm to the U.S. economy. [5]

How did J.P. Morgan influence Jesse L. Livermore?

During the financial crisis of 1907, Livermore made $1 million in profit from short positions in one day. When famed banker J.P. Morgan urged him to close his position in the interest of the country, Livermore did so. He then made an additional$3 million in profits when the market rebounded.

Summary

Jesse L. Livermore's rise from record-keeper to Wall Street legend remains revelatory to investors today. His experience became a historical record of unregulated stock trading in the early 20th century.

References

[1] Business Insider. "The Life of Jesse Livermore."

[2] The Wall Street Journal. "The Bear of Wall Street."

[3] Warrior Trading. "Jesse Livermore."

[4] Investor. "The Role of the SEC."

[5] Traders Log. "Jesse Livermore."

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