How the World’s Greatest Trader Started at Zero
After his great triumph in 1929, Livermore lost his edge in the market. This may have been due to his depression, which was not treatable in his day, and in addition, the rules of the market were changing – new laws were being introduced. He lost his money again by the mid 1930′s – it is not known how this happened. He had been down before, but never bounced back despite having his trusts to raise a trading stake. Unfortunately he shot himself in 1940, and his note said that he saw his life as a failure.
There is no doubt that despite his failures, Livermore was still a market great. What lessons can we learn from Livermore’s successes and failures?
Well, he started at zero and made several fortunes, starting again from scratch. He had early success through studying and recognising market patterns, but lost when he had to trade in a different market. After time, he discovered that the overall long term trends were where he could make the most money, and he was willing to trade wherever opportunities arose, and trade either long or short.
He became extremely financially successful, but he was always interested in the markets for the intellectual challenge rather than the money itself:
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.
Although he didn’t always follow his own rules (and lost when he didn’t), he developed money management techniques that involved testing the waters with a small amount of money before progressively adding his trade. He set up his own trading room, and developed a trading style that fit with his personality. He ignored tips and market gossips and became confident in his own judgement.
One of the best books on Jesse Livermore was the semi-fictional biography “Reminiscences of a Stock Market Operator” by Edwin Lefevre, written in 1923.
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Tags: Jesse Livermore, millionaire trader, stock trader, Trader biography