What did Jesse Livermore do wrong to blow up a few times in his trading career?

[Amahrix]

Over 42 days in 1932, the market snapped back, regaining 93% of its value. Livermore was badly hurt because of his short holdings and, to add insult to injury, went long just as the bounce ended. By the middle of 1933, all his gains from 1929 had evaporated. He was not only broke by 1934, but also owed $5 million to creditors."

If this is the case... then put simply, he didn’t have tail risk management.

It is as simple as that...no tail risk management.

Hedge the tails! (Also means against surprise upsides...or no surprises at all if everyone is expecting a surprise in one direction or another, or against downside.. you get the point).

 

[carrer]

All his wife's prior husbands committed suicide. I can't remember was it 2 or 3 husbands before him. See the pattern here?

 

[Turveyd]

Greed is the problem, make enough money so you can live the rest of your life in what you deem comfort and have fun, retire, if you keep going eventually something will go wrong then you'll have nothing.

I'm 48 average male life expectancy say 78 so 30years, £30K per year so 900K boom retired.

As I get older the amount comes down, hoping I'll make enough ( 15K ) for 6months of the good life right at the end

 

[Pekelo]

who tried his best to pay back his debts.

Let's correct this to: He always paid his debt, just like a Lanister.

 

[Pekelo]

...and here comes the usual, concerning Jesse...

He died unnaturally.

1. You are offtopic, the question was about his trading.
2. Most people die unnaturally, unless you think that car accidents or cancer are natural cause of death.
3. He lived 4 decades in luxury, there is such a thing as living too long.

 

[Pekelo]

Your question was answered as best as anyone can in the link provided in post #5. The long answer is that we just don't know his trading that well in his last 2 decades. Times changed, markets changed, he averaged into losers, etc.

He looks like a loser to me,

Well, a loser doesn't live in luxury from his 20s to his 60s. And here is a tricky math should I call life math I would like to point it out. People life times aren't equal. People in prison or in hospital have less enjoyment or positive experience than normal people. And we can assume that rich people have also (or at least can have) more enjoyment and experience and an average 5/40 people. That is not to say normal people can't enjoy themselves, but everything considered...
Hell, if you are rich, the law treats you better and you can get on the organ transfer list faster a la Jobs, and there are plenty of other quirks. In short, it is better to be rich, even if you don't use those quirks...

So no Sir, Jesse wasn't a loser. He should have quit the game once he made his fortune for the 4th (!!!) time, but I think it is save to say he lived a long and exciting and fulfilling life what most of us even today can't repeat.

 

[qlai]

If this is the case... then put simply, he didn’t have tail risk management.

Aren't you a genius riding on 100 years of research since. There were no regulations, no options. People used to corner the markets all the time. Imagine the position sizes he used to put on. I doubt very much you can protect yourself from tail risk even in today's markets when your position size gets large enough to be noticed.

 

[zdreg]

Aren't you a genius riding on 100 years of research since. There were no regulations, no options. People used to corner the markets all the time. Imagine the position sizes he used to put on. I doubt very much you can protect yourself from tail risk even in today's markets when your position size gets large enough to be noticed.

You should be so lucky to achieve those heights.

 

[Amahrix]

Aren't you a genius riding on 100 years of research since. There were no regulations, no options. People used to corner the markets all the time. Imagine the position sizes he used to put on. I doubt very much you can protect yourself from tail risk even in today's markets when your position size gets large enough to be noticed.

Thx for your comment.

Looks like my statement is still correct. He blew up because he had no tail risk management. The unlikely happened, and it crushed him...

If he couldn’t manage that risk because the product didn’t exist, then many were doomed from the start, not just Livermore.

 

[TommyR]

hmmm suicide is common in fraud based blow ups.