Legends - Jesse Livermore

• NAME: Jesse Lauriston Livermore
• OCCUPATION: Stock Trader, Stock Speculator
• BIRTH DATE: July 26, 1877 / Died: Nov 28 1940
• PLACE OF BIRTH: Shrewsbury, Massachusetts

Personal Profile

In his early teens, Livermore left home to escape a life of farming. He went to Boston and started his long career in stock trading by posting stock quotes for the Paine Webber brokerage firm. 

He then began trading for himself and by the age of fifteen, he had reportedly produced gains of over $1,000, which was big money in those days. Over the next several years, he made money betting against the so-called "bucket shops," which didn't handle legitimate trades – customers bet against the house on stock price movements.

He did so well that he was banned from all of the shops in Boston, which prompted his move, at age 20, to New York where his speculative trading successes - and failures - made him a celebrity on Wall Street and around the world. His financial ups and downs finally ended tragically with his suicide death at the age of 63. 

Investment StyleJesse Livermore had no formal education or stock trading experience. He was a self-made man who learned from his winners as well as his losers. It was these successes and failures that helped cement trading ideas that can still be found throughout the market today.

Some of the major principles that he employed include:

• Money is not made in day trading on price fluctuations. Livermore emphasized the importance of focusing on markets as a whole, rather than on individual stocks. He noted that greater success comes from determining the direction of the overall market than attempting to pick the direction of an individual stock without concern for market direction.
• Adopt a buy-and-hold strategy in a bull market and sell when it loses momentum.Livermore always had an exit strategy in place. (To learn more, see A Look At Exit Strategies.)
• Study the fundamentals of a company, the market and the economy. Livermoreseparated successful investors from unsuccessful investors by the level of effort they put into investing.
• Investors who focus on the short term eventually lose their capital.
• Ignore insider information; make your own independent analysis. Livermore was very careful about where he got his information and recommended using multiple sources. (For more insight, see Can Insiders Help You Make Better Trades? and When Insiders Buy, Should Investors Join Them?)
• Embrace change in adapting investing strategies to evolving market conditions.