From $5 to a billion-dollar fortune and the gunshot in the closet—The stock trading legend Jesse Livermore's life in stocks comes to an end

Prologue: The Symbiosis of Genius and the Devil

Jesse Livermore, born in 1877, experienced four bankruptcies and three failed marriages throughout his life, yet he left behind the most brilliant trading legends on Wall Street. He could make $7.5 million in just three months from a major earthquake disaster, and he could also lose everything due to a single misjudgment. Ironically, this trading master ultimately ended his life in a coat closet at a five-star hotel in Manhattan, using a Colt .32 revolver. His story is both the pinnacle of Wall Street legend and the abyss of human nature.

The Farmer Boy’s Revenge: Entering the Financial World at 14 with $5

While most 14-year-olds are still whining in classrooms, Livermore, under his mother’s secret support, left the foul-smelling Massachusetts farm with only $5 (equivalent to about $180 today).

His father was a stubborn farmer determined to have his son inherit the land. But this genius boy had been reading financial newspapers since age five, with math scores far surpassing his peers. His mother saw through his talent and decided to create an opportunity for him by a “disappearance.” In spring 1891, Livermore secretly boarded a carriage and train, traveling to Boston.

He did not follow his mother’s instructions to stay with relatives but was instead attracted by the flashing stock quotes outside the Paine Webber building. With his calm demeanor and slightly mature appearance, the farm boy successfully applied for a position as a tape recorder, officially stepping into the world of finance.

The Cipher of Numbers: From Quote Clerk to Trading Genius

During tedious record-keeping, Livermore began observing seemingly random stock fluctuations. He used one-cent grid paper to draw price charts and discovered astonishing patterns:

• Certain stocks always retraced exactly to the 3/8 level of their previous wave (an early form of modern retracement theory);
• Union Pacific Railroad’s stock often showed similar fluctuations at 11:15 a.m. and 2:30 p.m.;
• Large buy orders were usually accompanied by specific support zones.

One day, while recording cotton futures prices, he suddenly realized: “These numbers breathe—rising like climbing stairs, falling like stepping on a snow pile that has collapsed.” At that moment, Livermore felt like a martial artist who had opened his meridians after years of training; he uncovered the intrinsic order of the stock market. These patterns later became the foundation of technical analysis.

By age 16, Livermore had left Paine Webber and turned to gambling (similar to CFD trading at the time). Starting with $5, he quickly earned $3.12 in profit. Before turning 20, he had accumulated $10,000 (about $300,000 today), and his impressive record led to a collective ban from Boston’s gambling houses—they refused to let him in because he kept winning.

The Trial in New York: When Genius Meets the Market’s Poison

In 1899, at 23, Livermore arrived in New York, the heart of the financial empire. There he met Native American girl Nettie Jordan, and within weeks, they married in a whirlwind.

His initial mistake was relying too heavily on data from stock automatic recorders, unaware that these data were 30 to 40 minutes behind the real-time market. Before the joy of his new marriage faded, he suffered a series of trading failures, losing all his funds. Desperate, he asked his new wife to pawn her jewelry to cover losses, but she refused. Seven years later, they divorced.

The Blood Battle of the Earthquake: $7.5 Million in Three Months

In 1906, at 28, Livermore rebounded with $100,000 in capital. But he began to question whether he was too conservative. To relax, he went on vacation to Palm Beach, where he devised a groundbreaking trading plan during his reflections on the beach.

In April, a 7.9 magnitude earthquake struck San Francisco, igniting fires that nearly destroyed the city. As the western hub of the U.S., Union Pacific faced huge losses. The market was optimistic, expecting railroad stocks to rise due to reconstruction needs, but Livermore saw the opposite.

Through on-the-ground investigation and broker intelligence, he discovered:

• Earthquake caused freight volume in San Francisco to plummet, drastically reducing UP’s revenue;
• Insurance companies needed to sell blue-chip stocks to cash out and pay claims;
• Financial reports were far below market expectations.

From fundamentals to technicals, Livermore built a complete short-selling framework: after the earthquake, UP’s stock briefly rebounded (market optimism), but trading volume shrank, and buying momentum waned. He waited for the stock to hit a “key point” (a resistance level in his trading system), then established short positions in three stages:

Stage 1 (April-May): Short around $160, as the market remained sideways.

Stage 2 (June): UP announced sharply reduced profits, triggering institutional selling that broke the $150 support, accelerating the decline to $130.

Stage 3 (July): Panic spread, UP plunged below $100. Livermore closed all positions near $90, earning $250,000 (about $7.5 million today).

Friends believed he had insider information, but the truth was far more complex—this was a perfect blend of fundamental analysis, technical interpretation, and money management. He used staggered position building to avoid market disturbance, strict position control to handle volatility, and deep market psychology to time his exits. These strategies remain effective 120 years later, though some argue he was just a lucky gambler with a big bet.

The Crowning Moment of Wall Street’s Short-Selling King: One Week’s Net Profit of 1 Billion

In 1907, Livermore discovered that New York Trust was heavily leveraged in junk bonds, with interbank lending rates soaring from 6% to 100%, signaling an imminent liquidity crisis. He disguised himself as a client to secretly investigate the collateral of several trust companies, confirming the assets were of extremely poor quality.

On October 14, Livermore publicly questioned Nickebork Trust’s ability to meet obligations, triggering a bank run. Three days later, the trust declared bankruptcy, spreading panic.

He dispersed short positions across multiple brokerages, shorting Union Pacific, U.S. Steel, and buying put options. On October 22, using the then “24-hour settlement rule” (T+0), he concentrated his short sales before market close, employing a rare “pyramid adding” method (adding to winning positions), which triggered automated stop-loss orders and accelerated the crash.

On October 24, the Dow plunged 8% in a single day. The NYSE chairman personally begged Livermore to stop shorting, warning the market would collapse entirely. Morgan’s consortium intervened just an hour before the market’s collapse. Livermore precisely timed his exit, covering 70% of his shorts. By October 30, he had liquidated all positions.

Total profit: $3 million (equivalent to about 1 billion today).

This battle cemented his legendary status as “Wall Street’s Short-Selling King” and revealed his craving for informational advantage—he later built a vast intelligence network.

The Fatal Weakness of a Genius: Fraud by Friends and Cotton Losses

After wealth, Livermore began to indulge—buying yachts, train cars, Upper West Side apartments, joining the most luxurious clubs, surrounded by beautiful women. As the saying goes, the wealthy are most vulnerable to greed.

His friend Teddy Plais was an authority in the cotton industry, holding firsthand information on the cotton spot market. Plais publicly bullish on cotton but secretly shorted with growers. He exploited Livermore’s psychological weakness—his desire to prove cross-market trading ability—and repeatedly fed him the narrative of “supply shortages.”

Even when Livermore’s data showed the actual situation was opposite, he stubbornly held a long position of 3 million pounds of cotton futures—far beyond reasonable limits. Ultimately, he lost $3 million, wiping out all the profits from his short in 1907. This loss triggered a chain reaction, leading to consecutive bankruptcies in 1915-1916.

In this disaster, Livermore violated his own three ironclad rules: never trust others’ advice, never average down losing positions, never let narratives override price signals. But rather than being simply betrayed by friends, it was a punishment from himself— or a fatal gamble failure.

The Comeback from the Abyss: Rebuilding $3 Million with Bethlehem Steel Stocks

After the cotton disaster in 1915, Livermore staged his most dramatic comeback. He voluntarily filed for bankruptcy protection, reached agreements with creditors, and kept only $50,000 for basic living expenses. Through secret credit lines obtained from his former rival Daniel Williamson—on the condition that all trades be executed by Williamson’s firm—he rebuilt his trading discipline. He was forced to use a 1:5 leverage (much lower than the usual 1:20), controlling single positions within 10% of total capital.

Coincidentally, World War I broke out. U.S. military orders surged, but Bethlehem Steel’s stock had not yet reacted. Livermore discovered that unpublished financial data of the company was leaked through industrial intelligence channels. Trading volume suddenly increased while prices remained flat—classic accumulation signals.

In July 1915, Livermore made his first tentative position, buying 5% of the stock at $50 per share. In August, as the price broke $60, he increased his position to 30%. In September, when the price retraced to $58, he refused to cut losses, convinced the upward trend remained intact. By January next year, the stock soared to $700 per share. He exited with a 14-fold profit, turning $50,000 into $3 million again.

Luxurious Life and Emotional Tragedy: Women and Divorce Chain Reactions

In the following decades, Livermore continued his stories of wealth and women. In 1925, he made $10 million trading wheat and corn. During the 1929 Wall Street crash, he shorted and made $100 million (about $1.5 billion today), establishing a formal trading business with 60 employees.

But these riches were gradually lost through divorce, taxes, and extravagance. After his first wife Nettie’s divorce, he married Dorothy, a dancer from the Zigfeld Follies, with whom he had two sons. Meanwhile, he secretly maintained a relationship with European opera singer Anita Venice, even naming his luxury yacht after her.

At the same time, Dorothy, like a modern lonely rich woman, was addicted to alcohol. The New Yorker’s sharp and precise commentary: “Livermore was as precise as a scalpel in the market, but blind as a drunkard in love. He spent his life shorting the market but always longing to go long on love—and both led to his bankruptcy.”

In 1931, Livermore’s second divorce was finalized. Dorothy received $10 million in settlement, then married a Prohibition officer much younger than her, and sold the $3.5 million mansion he bought for the family at a bargain price of $222,000. Livermore’s jewelry and wedding rings engraved with her name were also sold for a few dollars—emotional humiliation that cut like a dagger.

In 1932, at age 55, Livermore met Harriet Mertz Noble, known as the “Social Widow.” After his last bankruptcy in 1934, they were forced to move out of their Manhattan apartment, surviving by selling jewelry.

The End: Gunshot in the Coat Closet and the Three Lines of Final Words

In November 1940, Harriet committed suicide in a hotel room with Livermore’s revolver, leaving a note: “Unable to endure poverty and his alcoholism.” Livermore wrote in his diary: “I have killed everyone close to me.”

On November 28, 1941, the day before Thanksgiving, in a coat closet at the Shirley Holland Hotel in Manhattan, a gunshot rang out. Depressed, Livermore pulled the trigger on his Colt .32 revolver against his temple— the same weapon he bought after his 1907 short-selling success, seemingly a closed loop of fate.

On the closet’s note, he left three lines:

“My life is a failure”

“I am tired of fighting, I cannot endure anymore”

“This is the only way out”

He had onl