The Greatest Trader Who Ever Lived

Ed Note: This man’s life story makes great reading for anyone near the markets whether a trader or an investor. 

When Jesse Livermore made his first stock trade at the tender age of 15, he didn’t hedge his bets. He consulted the charts he’d compiled working as a chalkboard runner in a Boston brokerage firm, and when the figures for the company in question, Burlington, checked out, he went all in, investing everything he had—all $5—in the railroad. Two days later, he cashed in his shares, for a profit of $3.12.

It was 1892.

Exhilarating, that first taste. The pendulum had begun to swing.

Livermore began to roam the streets of Beantown, frequenting its bucket shops, gambling counters that took bets on stocks without executing actual trades. His ability to recognize patterns in the ticker tape stood him in good stead. In six months, he’d accumulated $1,000. Five years later, it was $10,000—enough to make him persona non grata to every pseudo-broker in the city.

So he moved to New York and graduated to trading with real Wall Street firms. Something, however, was wrong. His system wasn’t delivering as expected. He watched his stake drop, first to $2,500, then to zero. At an age when most contemporary youth were still preoccupied with fraternity smokers and petting, the “Boy Plunger” (turn-of-the-century slang for “reckless gambler”) had already gone through a full cycle of boom and bust.

Livermore decided the problem lay in the lag time between the stock order and the execution of the purchase itself. So he borrowed $500 against future gains. The pendulum began to swing wider. Quickly making back what he’d lost, he increased his stash further, to $50,000. Then, on May 9, 1901, he lost it all, every penny, largely due to the frenzied pace of the day’s trading.

Again he hit the bucket shops, again accumulating a stake that allowed him to get back into the game. He returned to New York with what he termed a “fair-sized roll.” Then, on April 16, 1906, he was hit by a premonition. With no warning, he yielded to a strange urge to sell short a thousand shares of Union Pacific railroad—an urge even he admitted he didn’t understand. Two days later, the San Francisco Earthquake hit. Union Pacific was decimated; he’d made $250,000 literally overnight.

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