If you look up this trader's name on google, many articles will pop up praising him as the
stocks or commodities and targeted people who were new to investing. Basically,
this about to be legendary trader started as a gambler at age 15 but called it "speculation".
He quit his job when he was 16 and started trading full-time. He took $1,000 home to show his mother.
She didn't like that he was "gambling," but he said he wasn't gambling; he was "speculating."
From 1895 to 1897, age 18 to 20, he made $10,000 from trading. This was a net return
of 1000% in three years. Now, remember, 1000% profit is not normal. During his time,
taking high leverage trades and risking a large portion of the total capital was a common thing.
High profits only come when high leverage is used, or when something has made a big move.
But because he won so often, most bucket shops in the Boston area stopped letting him play.
From age 21 to 22, he kept trading with Haight & Freese, which was the last bucket shop in the
Boston area that hadn't banned him. But Haight & Freese gradually made the bid-ask spread wider and
imposed strict margin requirements, making it much harder and riskier for traders to make money.
So on September 14, 1900, when he was 23 years old, he moved to New York.
When he got there, the stock market was in a strong bull market. At Harris, Hutton & Company,
he made money by trading on the long side. In five days, he turned $10,000 into $50,000. Again,
remember that these are not normal profit gains, and there was probably high leverage used.
High leverage can also backfire, and in May 1901, that's exactly what happened. He thought there
would be a price correction, so he went short and used a 400% margin. This time he lost everything
because the ticker tape didn't change fast enough for him to make trading decisions
in real-time. He borrowed $2,000 from Ed Hutton, moved to St. Louis, where no one knew him,
and went back to betting at bucket shops. In 1901, when he was 24 years old, he bought
stock in Northern Pacific Railway. This was his first big win. He made $500,000 from just
$10,000. Again, this was most likely a result of using high leverage and a big price move.
In 1906, while he was on vacation, Thomas W. Lawson told him to take a big short position in
Union Pacific Railroad the day before the 1906 San Francisco earthquake. This made him $250,000.
Later, he went long on the stock. However, his friend Edward Francis Hutton, who owned
the brokerage house where he did most of his trading, persuaded him to close his position,
which caused him to lose $40,000. During the Panic of 1907, Livermore's
huge short positions made him $1 million in a single day. But his mentor, J. P. Morgan, who
saved the whole New York Stock Exchange during the crash, told him not to do any more short selling.
Livermore agreed, and his net worth went up to $3 million as he profited from the rebound.
In addition to an expensive apartment, he purchased a $200,000 yacht
and a rail car. There were mistresses in his life and membership in exclusive clubs.
It was Teddy Price in 1908 who convinced him to acquire cotton, which Price then secretly sold.
This resulted in our Greatest Trader going bankrupt, but he was able to make
up all of his losses. But then he declared
himself bankrupt once more in 1915. After World War I was over, he took over
the cotton market in secret. The only thing that stopped him was a call from the U.S. Secretary of
Agriculture, who asked him to come to the White House for a talk. He agreed to sell the cotton
back at the same price he bought it for. This kept the price of cotton from going up abnormally.
When asked why he had a dominant position in the cotton market, he said, "To see if I could."
In 1924-1925, our greatest trader was involved in market manipulation, earning $10 million by
trading wheat and corn and arranging a short squeeze on Piggly Wiggly stock.
At the start of 1929, he took out a lot of short positions. To hide what he was doing,
he used more than 100 stockbrokers. By the time spring came around, he was down
$6 million on paper. But when the stock market crashed in 1929, he made around $100 million,
about $1.4 billion in today’s dollars, and became one of the richest people in the world.
People blamed him for the crash after a series of newspaper articles called him the "Great Bear
of Wall Street." He also got death threats, which made him hire an armed bodyguard.
But in 1932, the market turned around and gained 93 percent of what it had lost. Out
greatest trader of all time was hurt badly by his short holdings, and to make matters worse,
he went long just as the bounce ended, which made things even worse. By the middle of 1933,
he had lost all the money he had made in 1929. In 1934, when the U.S. Securities and Exchange
Commission was created, new rules were put in place that affected how he traded.
Many of his tricks and plans were now illegal and could get him into a lot of trouble.
He lost all of his money in the end. In 1934, he filed for bankruptcy for the third time,
listing $84,000 in assets and $2.5 million in debts. On March 7, 1934, he was kicked
out of the Chicago Board of Trade. Then, in 1939, he launched a financial
consulting business where he sold a technical analysis system.
If you can't make money trading, sell a trading course for 1000s of dollars, right?
But then he also wrote the book "How to Trade in Stocks," which was published in March 1940. The
book didn't sell very well because World War II was underway, and most people didn't care much
about the stock market. At the time, his ways of investing were controversial, and reviews
of the book were mixed when it came out. So was he really the greatest trader of all time?
If you noticed, I haven't mentioned his name yet so that you look at his story with a neutral view.
His name was Jesse Livermore, and many people looked up to him as the best trader to ever live.
But if we keep a neutral view, he sounds more like a reckless trader who made money on high
leverage trades. He is also considered a pioneer of day trading, but most of his money came from
betting on fundamental events. Furthermore, he almost always gave back his profits to the market.
He was involved in market manipulation, filed for bankruptcy multiple times,
and lost all of his money in the end. So, was he really the greatest trader of all time?
You be the judge of that. On Thanksgiving Day, November 28, 1940, around
5:30 p.m., Livermore shot himself with a Pistol in the cloakroom of The Sherry-Netherland hotel
in Manhattan, where he usually had cocktails. In Livermore's personal leather-bound notebook,
police found a handwritten note. The note was addressed to Livermore's wife, Harriet,
whom he called "Nina," and it said, "Can't help it. Things have been bad with me. I am tired of
fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love.
I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".