Learning from Jesse Livermore
Posted on May 28, 2008 in the Investing category
.Years ago I asked a friend of mine to recommend a book about investing and the stock market. He recommended “Reminiscences of a Stock Operator” by Edwin Lefevre and it was then that I was introduced to Jesse Livermore.
Livermore was born in 1877, and started trading at age 15. He was a highly visible stock trader and speculator for almost fifty years. Livermore was famous for making and losing several multimillion dollar fortunes during his professional career.
Investment Style
Jesse 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 used were:
- 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.
- Study the fundamentals of a company, the market and the economy. Livermore separated 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.
- Embrace change in adapting investing strategies to evolving market conditions.
Jesse Livermore’s investment strategies and tactics work as well today as they did almost 100 years ago.
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