It would not be wrong if we call Jesse Livermore one of the first successful traders globally and consider him a pioneer of day trading. Even a book was written on his life, “Reminiscences of a Stock Operator” which every trader should read for once.
Livermore at an early age dropped out of school and started working as a chalk Boy, writing changes in the price of stocks on a whiteboard. Later, he saw trends in those prices and started writing them down in his notepad.
Maybe those numbers didn’t sense for most people, but for Jesse, it was a gold mine. He was able to look at different patterns and predict future prices.
After getting the confidence to place bets on these predictions, he started betting in Bucket shops. Bucket shops at that time had never seen a person like him, and he was making their life difficult. So the best solution they got was to ban Jesse from all their franchises in the USA.
After getting banned, Jesse started working in NYSE, in the beginning, he was not good with it and was only losing money. The reason being, he was not able to control his emotions.
But soon, he learned how to do that, and in the panic of 1907, he made $1 million in a single day, becoming one of the most famous traders in NYSE. There are rumors that at the time of the crash, J.P. Morgan himself asked Livermore to square off his short position to bring the market back to health.
Livermore repeated the same formula in the 1929 crash and made $1.9 billion in today’s money.
In the process of making this money, he also lost it. In 1908, he broke his own rule by taking someones advice to buy the cotton trade and booked a 90% loss in that trade. After 1929, he started losing his money again, and no one knows the real reason behind it. Some people speculate that it was his personal life that affected him and his trading. And in 1940, he committed suicide.
He was someone who made trend following, famous. No one knows what he would have achieved with all this pattern recognition system, and we will never get to know.
There are many quotes in his book, but my favorite is
“What has happened in the past will happen again. This is because Markets are driven by humans, and human nature never changes.”
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