What did Jesse Livermore do wrong to blow up a few times in his trading career?

Discussion in 'Risk Management' started by learner88, Aug 12, 2019.

  1. Jesse Livermore is the favourite trader among traders. Many traders look up to him as a mentor. Yet, he blew up a few times in his trading career and eventually committed suicide. He looks like a loser to me, yet many great traders look to him as one of the greatest winners.

    Given that he is so highly respected, it will be interesting to know what lessons we can learn from his blow-ups. I believe most of these lessons lie in risk management.
  2. maxinger


    You are right mister.
    Many people look up to him

    I don't. He died unnaturally.
    No point earning tons of money but lose one's life.

    Important thing in life is to be happy with what you have
    AND what you don't have.
    tomas262 and jl1575 like this.
  3. zdreg


    You call shooting himself in the cloakroom of the Sherry-Netherlands Hotel in New York City an unnatural death. I find your remark shocking/
  4. themickey


    Lesson #1, watch out for the type women you are attracted to, certain pussy can be dangerous to your well-being.
    tomas262, Shaily, _eug_ and 1 other person like this.
  5. zdreg


    trader99 likes this.
  6. ElCubano


    “It’s not what you have, it’s how little you need” - someone
    metatrader54, ironchef and speedo like this.
  7. I suspect he suffered from mental depression. When rich people kill themselves, it's usually mental depression since they've got so much going for them compared to poorer people.

    To be fair to Livermore, I suspect his depression was the main cause of his final blowup. How the final blowup happened is a mystery.
  8. qlai


    You need to separate personal life with professional life. Do you look up to a trader who looses money consistently but has a great family life? Of course not.
    The fact is that this is a guy came from a farm and made himself into an icon with no education or help from anyone.
    I don't know what caused his blow ups, but the times were different so you can't compare h to today's top traders.
    There may have been a better traders during his times, but what did they leave behind? They took their money and their knowledge to their graves. That's their right, but gets no respect from me. Livermore shared and inspired countless. That's what makes him one of the greatest, if not the greatest. In one of the books, it says that even though he blew up several times, people would not hesitate to lend him money because he would always make sure to pay back his debts. Not like some current traders blowing up OPM and all they have to show for it is a crying YouTube video. Appoling.
    Axon, tomorton and helpme_please like this.
  9. Mr Jesse Livermore was an honourable man who tried his best to pay back his debts. For that, I respect him.
    qlai likes this.
  10. trader99


    Thanks for the link. So, he has a strong short bias. Which works great during the crash of 1929.
    HOWEVER, he didn't covered all of his position. He was up $100M (or $1.4B in today's dollar) and 4-5 years latter he was broke? WTF?!

    I know it's easy with hindsight. With shorts, I'm a lot quicker to cover than with longs since there's a long bias in the market. This is the new me speaking. Years ago I countertrend and held on for catastrophic losses(well not catastrophic but relative to my small account level).

    Then he went long at the top of bear market rally just when others were getting out and reshorting. Basically he went long at resistance in a bear market. I thought he studied TA.

    However, wouldn't cutting losses have allowed him to keep most of his gains? So let's say he has a super wide stops. at 10%. So on a $100M he will lose $10M. He would still be $90M richer. The fact that he lost everything means he has really poor risk management despite being a "good" trader that caught huge moves.

    Hmm.. interesting.

    Regardless, he was a baller! I would be scared to swing such a large amount in order to make $100M.

    "But Livermore was soon up and investing again, making and losing fortunes. The peak of his career came during the crash of 1929, while he was heavily shorted. When the worst of the crash was over, he was worth $100 million, about $1.4 billion in today’s dollars, and one of the richest people in the world.

    Over 42 days in 1932, the market snapped back, regaining 93% of its value. Livermore was badly hurt because of his short holdings and, to add insult to injury, went long just as the bounce ended. By the middle of 1933, all his gains from 1929 had evaporated. He was not only broke by 1934, but also owed $5 million to creditors."
    #10     Aug 12, 2019