Jesse Livermore: Speculator King

Read this book if you want an author who gives you the negative perspective of Jesse Livermore’s life. The author believe Mr. Livermore was a complete failure who could not hold on to his money, leveraraged far to much debt, was an ego maniac, and womanizer. He also believes that the Livermore Key that was introduced in Livermore’s own book was a complete fraud, designed to confuse the masses and bring them to turn their money over for directed investment by Livermore or others. Livermore is a personal hero of mind not for his looses but his ability to make millions from scratch several times, his resiliency until late in life, and his ability to keep a calm head and enjoy life. While the author reduces him to nothing but a two bit market manipulator running cash pools to change prices. While most of the facts the author is correct about, I still hold Livermore in high esteem for his ability to go long or short for gains and for his being a lifelong student of the market. Read Richard Smitten’s book Jesse Livermore: World’s greatest stock trader for a more reverent look at his life, or Livermore’s own book How to trade in stocks for what the man himself wrote about his system.

Almost every trader on the planet knows all about Livermore and his world class trading acumen. But this author doesn’t buy it and I think he has a point.

Successful trading is about making money AND keeping it. Livermore seems to be able to make it (but only when the markets are volatile/moving) but never seems to be able to keep it, having gone broke several times in the past.

And it takes a special kind of genius/loser to make $1billion in profits (in today’s money) out of the crash of 1929 to then declare bankruptcy 5 or so years later. Nobody really knows how that’s possible. Perhaps it’s because a) a trader/Livermore starts to believe his own hype, and b) the markets start sloshing around hence buying high (looking for higher prices) only for the market to retreat and then go short (looking for lower prices) only for the market to reverse again.

But trading ranges, large or small, are a massive part of how the markets move so either learning to stay out or take advantage of them must be a (learned) skill of any trader/strategy.

The author also delves into Livermore running of pools and you know in those days before the start of massive regulations, they were a licence to steal and all round monkey business. If Livermore was heavily involved you know he was up to no good. But to be fair, everyone running pools in those days was up to no good.

Another interesting point to think about Livermore is if he only made money in big moving markets, up or down, then no wonder he suffered the financial pain that always seemed to come his way. I therefore say, Livermore was a one dimensional trader, probably THE best at milking a good move but good moves only come around (perhaps) once over a 5 year period. So during the tough times when prices don’t make the good moves he ends up pi**ing away most/all of his profits from the good times.

Overall, if you’re interested in Livermore this is a must read to give a balance to the man.