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Jess Livermore (1877 – 1940), was also known at the Boy Plunger and ‘Great Bear of Wall Street.’ He was an early 20^th century stock trader and famed for making and losing several multi million dollar fortunes and short selling during the stock market crashes in 1907 and 1929.

Livermore enjoyed successes as a securities speculator and left traders a working philosophy for trading securities that emphasizes increasing the size of one’s position as it goes in the right direction and cutting losses quickly. He sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.

He first became famous after the panic of 1907 when he sold the market short as it crashed. He noticed conditions where a lack of capital existed to buy stock. He predicted that there would be a sharp drop in prices when many speculators were simultaneously forced to sell by margin calls and a lack of credit. With the lack of capital, there would be no buyers to absorb the sold stock, further driving down prices. After the crash and its aftermath he was worth $3 million.

In 1929 he noticed market conditions similar to that of the 1907 market. He began shorting various stocks and adding to his positions and they kept declining in price. When just about everyone in the markets lost money in the Wall Street crash of 1929, Livermore was worth $100 million after his short selling profits.

Livermore’s fortune would have amounted to anything between 1 and 1.3 billion dollars in today’s money – a remarkable feat for a self-made stock and commodities trader who traded with his own money, not other people’s.

Even today, many stock and commodity traders owe Jess Livermore a deep debt of gratitude for sharing his experiences in Reminiscences of a Stock Operator. In this book, financial journalist Edwin Lefevre interviewed Lawrence Livingstone, a pseudonym for Jess Livermore.

Livermore states ‘The point is not so much to buy as cheap as possible or go short at top price, but to buy or sell at the right time.’ Some of Livermore’s hard won rules for trading include buying rising stocks and selling falling stocks, not trading every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it is rising you should be long, it is falling, you should be short. Only enter a trade after the action of the market confirms your opinion and then enter promptly. Continue with trades that show a profit and end trades that show a loss. Markets are never wrong – opinions are.

What made Livermore so successful during the first thirty years of the 20^th century was that not only was he multi-talented in the traditional sense (his skills in analyzing long-term trends and fundamentals were as good as his skills in tape-reading and in day trading), he was also multi talented in the sense that he was able to evolve with the market very successfully. He had always been flexible in either trading the long side or short side – and he was able to sit out in a market that was devoid of activity as well.

Livermore was a great trader and speculator and the legacy he left is important for the novice, the amateur and even the professional trader. His teachings, found in his books and biographies, are as relevant and needed now as they were when he wrote them.