Secrets of Stock Market Millionaire Jesse Livermore

trading chronicles Mar 25, 2019

Jesse Livermore was born on July 26, 1877 in Shrewsbury, Massachusetts. When Jesse was 14 years old, he ran away from his father’s farm and started working at a brokerage posting stock quotes. Excelling in mathematics, he quickly gained a feel for the markets.

A year later, at the age of 15, he started putting his theories to the test. With very little capital to use at his young age he started placing wagers at his local bucket shop. A bucket shop was a gambling house for stocks where participants could bet on the direction of any stock. Jesse quickly made his first $1000 (the equivalent of $27,000 today) and quit his day job at the brokerage. He made so much, however, that the bucket shop owners grew tired of handing over their money to Livermore and permanently banned him from their establishments.

By then Livermore had made more than enough to try his hand in the actual stock market.
He found his bucket shop strategies ineffective in the new environment and went to work developing a new strategy. Over his trading career Livermore amassed a fortune. First turning $10,000 to $50,000. Then $250,000. Then multiple millions over his lifetime.

Today his exact strategies would be ineffective. What works and doesn’t work in the stock market has evolved as technology has advanced. The trading environment has certainly changed requiring market participants to develop new trading strategies just as Livermore did when moving from the bucket shops to the stock market.

What then, is the secret of Jesse Livermore’s success, and how can it help us in the stock market today?

The answer is how he developed his strategies, not the exact strategy itself.

Livermore approached the field of investment and speculation differently than most other people. When he was developing a successful strategy, he had the attitude of a scientist. He spent many hours recording everything he could about the market and then made a scientific study of what he had recorded.

“… Let me warn you,” he states in the beginning of his book, “that the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions.”

Livermore continues to stress the act of record-keeping throughout his book and attributes his record-keeping as the ultimate key to his success. Once his records were created, he could start looking back and learning from it. By studying what he had recorded he saw relationships that were hidden. He was able to make connections between market events that hadn’t been made before. It also helped him form an opinion on how a stock would act in the future. If a stock started acting unusual, he could look back into his records and find out if anything similar had happened in the past. This knowledge is how he stayed ahead of the crowd, mastered the markets and profited immensely.

The book ends with a detailed account of how to keep your own records in a journal like he did. Is keeping a written journal of stock market data really the best way to keep records and develop a strategy in the digital age?

It would be impossible to hand record the torrent of data generated by the markets every day. It should still be an exercise though for every trader to have personal journals that help them be a student of their own trading, but not need to record items that can be databased automatically. Thankfully, for traders like you and me who are dedicated to the scientific study of the market, we have services like StockOdds Predictive Analytics.

StockOdds is a database of a variety of signals and the associated odds of what could happen in the users output timeframe. It is your digital journal that records past events and post event outcomes for you. It does the grunt work of recording so that we can spend more time looking for connections and correlations.

What really lets StockOdds stand above the rest, however, is how it helps us find those connections. You see, as the amount of data increases, so does the complexity. Having a lot of data isn’t useful if we can’t make sense of it! Which is exactly why StockOdds simplifies key relationships in the data, boiling it down to one focused number that we can use for actionable insights. Whether a single trade, a variety of pair trades or hundreds of symbols in long versus short basket trades, StockOdds Alternative Data combined with profound education will enable you to navigate today’s markets with ease.

It may sound complicated but it’s not once you learn how to use it. In fact, you probably use a database right now for your trading. If you’ve ever used a charting software, you’ve used a database. What makes a charting software special is the way it displays the data. By displaying it
in the form of a chart you can see certain relationships quicker and easier (such as support and resistance levels of prices).

StockOdds does not display data in the form of a chart. It goes deeper than that. It shows us relationships that a chart does not show.

Do you remember the first time you looked at a candle chart? Chances are it seemed confusing back then but is now second nature to you. The same holds true for StockOdds.

Nowadays, anyone with a computer and a broker account has access to a chart though. If everyone has something, it’s not an advantage. Further to that, a signal in the form of a chart does not reveal what occurred in the past lookback period on each occasion that that signal appeared. Subscribers of StockOdds have that knowledge and insights providing them with that competitive edge. It truly is that institutional deep data democratized for individual traders like us.

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