Live After Quit

“Dead Money No More: Jesse Livermore’s Lasting Insights on Investing Right

The shocking death of Jesse Livermore has been a dominant theme of Wall Street for nearly a century. Presented in a semi-autobiographical fashion, the story chronicles the rise and fall of one of the greatest stock traders of all time. Jesse Livermore, the iconic Wall Street trader, often found himself in sticky financial situations from time to time. As a matter of fact, his daring approach to trading is often compared to gambling. Chesterton’s saying “the worst crime of a gambler is that he had not lost enough” comes to mind when discussing the results of his extravagant flirtations with the stock market. But in spite of his bad luck, Jesse Livermore always seemed to find a way out of difficult positions. His ability to unlock capital from seemingly “dead money” positions was legendary. Many of the techniques he employed, such as short selling and seasonal plays, often allowed him to capitalize on others’ fear and then reap the rewards. In the final episode of his life, Livermore left some valuable insights behind. His “dead money combination” was a special two-way hedging technique. It allowed him to invest long while at the same time taking maximum advantage of spiking or recessive stock prices. Livermore’s Dead Money Position (DMP) strategy was ground-breaking and adopted by traders and investors across the world. Another insight left by Livermore is his “best defense”. He believed that the best defense against market risk was to invest with companies of strong fundamentals, companies with solid earnings. The strategy he employed led him to stay away from companies with poor financials, without much prospect of growing profits. In conclusion, many of Jesse Livermore’s trading tactics and wisdom lives with us today. The legacy of his “dead money” position and “best defense” strategies have been used to great effect by those that understand their value. It’s no wonder why Livermore remains such an important figure in the history of the stock market. His insights were truly a stepping-stone in the development of modern trading techniques.