How to start trading at 15 and become one of the world’s richest men – The story of Jesse Livermore’s first trade.
Jesse Livermore began his working life at the age of 14, as a quotation board boy in a stockbroker’s office.
He was, he believed, particularly suited to the job because of his strong abilities in mental arithmetic and number memorization.
Stock prices came into the stockbroker’s offices on a ticker tape, a continuous strip of paper bringing the prices from Wall Street.
It was Livermore’s job to take the prices from the tape and write them on the board for the stockbroker’s customers to see.
Little did the 14 year old boy realize that, for the rest of his life, his fortunes would be inextricably linked to the tape and his ability to read its message.
Patterns in Prices – The Message of the Tape
As time passed, Livermore started to believe he could see patterns, or repetitions, in the waves of numbers that flowed each day from the tape. He began to write the numbers in a notebook and tested himself, predicting the direction that different stock prices would take:
“Say that after studying every fluctuation of the day in Sugar I would conclude that the stock was behaving as she always did before she broke eight or ten points. Well, I would jot down the stock and the price on Monday, and remembering past performances I would write down what it ought to do on Tuesday and Wednesday. Later I would check up with the actual transcriptions from the tape.
“That is how I first came to take an interest in the message of the tape. The fluctuations were from the first associated in my mind with upward or downward movements. Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations… The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now – not tomorrow. The reason can wait. But you must act instantly or be left. Time and again I see this happen.”
Jesse Livermore’s First Trade
One day another office boy told Livermore that he had been given a tip to buy shares in Burlington and asked if Livermore had any money to join him, predicting they would quickly double their money. Livermore took out his notebook and looked at the prices he had recorded for Burlington. In Livermore’s estimation, Burlington’s price was acting in the way he would expect it to if it were going to rise.
Livermore, now 15 years old, invested all he had in Burlington – just a few dollars – and was rewarded two days later with $3.12 profit. Buoyed by his success, in the following months Jesse Livermore went on to make his first $1,000 – a very large sum indeed – by virtue of his ability to read the message of the tape.
“After that first trade, I got to speculating on my own hook in the bucket shops. I’d go during my lunch hour and buy or sell – it never made any difference to me. I was playing a system and not a favorite stock or backing opinions. All I knew was the arithmetic of it. As a matter of fact, mine was the ideal way to operate in a bucket shop, where all that a trader does is to bet on fluctuations as they are printed by the ticker on the tape.
“It was not long before I was taking much more money out of the bucket shops than I was pulling down from my job in the brokerage office. So I gave up my position. My folks objected, but they couldn’t say much when they saw what I was making. I was only a kid and office-boy wages were not very high. I did mighty well on my own hook.”
Having learned that prices could behave predictably, Livermore started to expand his trading operations, ultimately amassing a fortune of over $100 million, worth over $1 billion today.