Jesse Livermore http://www.financial-spread-betting.com/list/?p=subscribe&id;=1 was a notorious stock market speculator during the first half of the 20th century. He was a major force on Wall St in markets that were plagued by the same hopes and fears as today's. Jesse Livermore ended up making fortunes and losing fortunes, making fortunes and losing it again. He even added to losing positions of wiped out companies in the belief they would recover. There are quite a few traders in Market Wizards including Jesse Livermore who lost their first pot. Published as a novel almost 100 years ago, Lefèvre's Reminiscences of a Stock Operators is believed to be a disguised biography of the famous Jesse Livermore, also known as the "Boy Plunger" for his outsized bets. The book chronicles the author's ups and downs in the days when stock market investing was largely an unregulated business. Lefèvre/Livermore shows contempt for "people who amuse themselves conducting imaginary operations in the stock market to prove with imaginary dollars how right they are." He argues that the only way to know if your opinions have any value is to back them with hard cash. "They say there are two sides to everything," he writes. "But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side." In reality, the older we get the less risk we can take and the more we need to adopt tighter money management. Background: From an early age it was clear that Jesse Livermore had a talent for spotting a good trade, and after leaving home aged fifteen he quickly found work chalking up prices for a stockbroking firm. It was here that he first began to learn the nuances of the stock market and found that he was particularly adept at predicting price movements. He turned this skill to his advantage at the local Boston bucket shops, where punters could bet on price changes in the market without having to buy stocks themselves. Livermore made so much money that he was banned from most bucket shops in the area, but he already had his sights set on a much bigger target. Livermore turned his attention the Wall Street and began speculating more seriously. Electing to go with perceived hunches as opposed to any recognised system of the day, he scored his first big windfall in 1906 by shorting the bullish Pacific Union railroad operator. Days after the trade one of the worst earthquakes in human history devastated San Francisco, reducing much of Pacific Union's infrastructure to rubble. Livermore profited to the tune of $300,000 and, although there was no possible way he could have predicted the natural disaster, this set the tone for much of the trading career of "The Great Bear of Wall Street". Just one year later Livermore was one of the few to realise that stock prices had reached an untenable position and shorted the market just before the crash of 1907. Again he made significant gains, which brought his personal wealth to over $3m. The profits accrued were impressive, but Livermore's greatest trade was still to come. But the time the Wall Street crash of 1929 occurred Livermore was already a major player in the US stock market. He'd made a fortune trading a bull market in the 1920s but saw the same circumstances arising in 1929 as he had seen in 1907, where a lack of capital existed to buy stock. This factor, coupled with the fact speculators would be forced to sell by margin calls was disastrous and lead to many traders' downfall.

• published: 04 Nov 2011
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