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Book Review: Trade Like Jesse Livermore

Friday 8th July 2005

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Trade Like Jesse Livermore
by Richard Smitten

Reviewed by Tony Cross, on behalf of Good Returns.

Jesse Livermore was one of the world’s greatest sharemarket traders. I have to confess to never having heard his name which may not be surprising given that he died in 1940. This book reveals some fascinating facts about the man who ran away from home at the age of 14 to get a job in the big city as a chalkboard boy (chalkie). Livermore was however no normal kid – he had a very inquiring mind and was always looking behind the figures he was writing up on the sharemarket boards. He made his first sharemarket trade when 15 years old and shortly afterward quit his job to become a full time trader.

During his lifetime Livermore was bankrupted four times but survived each time and paid back all his creditors in full each time. He was probably one of the few investors to make money in the great sharemarket crash of 1929 when he made $100 million by investing short. For someone so wealthy he knew that happiness was elusive and had nothing to do with wealth. This may explain why he shot himself in 1940 at the height of his fame.

Even though Livermore lived some time ago the experiences and knowledge that he acquired are just as applicable today. Smitten has made his book very readable and all most examples illustrating Livermore’s techniques are based on current market information.

The main take outs from the book relate to the analysis of investor psychology which Livermore was an expert on. There is some hugely valuable advice imparted throughout the book such as never to dollar cost average purchases when a stock is falling in price. Livermore’s 45 years of experience in trading the markets is simplified in this book into straight forward rules. The section detailing Livermore’s technical analysis using pivotal point trading is interesting but there are more comprehensive technical aids available to investors these days.

To me the real value in the book lies in the teachings about investor behaviour. An interesting aside is that Livermore was completely unsuccessful investing outside of the sharemarket.

My overall view of the book is that there are many treasured gems scattered throughout that would be invaluable for anyone investing in the sharemarket. Very few of us would be anywhere near as obsessed with the markets as Livermore, but as he points out most people spend more time on buying an appliance than what they would buying a stock. Information is well laid out and presented with lost of conclusions and summaries. I found the text quite readable and not too technical which many other books of this nature are. Given it's over 50 years since Livermore died his advice is just as pertinent as ever. I am sure if Jesse Livermore were alive today he would be just as adept at turning over a profit as he was in the 20’s and 30’s.

After reading this book I feel like I know Livermore very well but would like to know a little more about this rather reclusive and introverted figure. Sometime I hope to read Smitten’s earlier book - Jesse Livermore: World’s Greatest Stock Trader.


Trade Like Jesse Livermore is available online through the Good Returns Bookstore at www.goodreturnsbooks.co.nz

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