Inspired by the Christmas spirit, I have in front of me an original copy of How To Trade In Stocks by Jesse Livermore. The jacket reads, “The Livermore Formula for Combining Time Elements and Price with 16 color charts. 133 pp. New York Duel. Sloan Press, First Edition. Special Edition Limited to Five Hundred Copies. Printed on all rag paper. Blue Beveled Buckrum, stamped in silver with the Livermore Market Key. Signed by the author before the first page of text. Exceedingly rare thus. 1940.”

The book is a collection of sage reflections based on the many losses and gains Livermore took, before he lost everything. It also contains 10 pages of rules as to how to record in 18 columns with black and red ink and pencil whether a stock “is in an upward trend or downward trend until a natural reaction occurs with particular reference to Pivotal Points .” And also “…depending on how prices are recorded when the market returns to around those points, you will then be able to form an opinion as to whether the positive trend is going to be resumed in earnest, or whether the movement has ended…” With 35 nebulous rules like this, that seem the work of a madman, it is no wonder that shortly thereafter he committed the final act of suicide, thus sparing his followers from further losing much more money. None of the rules are tested, and no concept of consistencies with randomness, and no attention to the grind that the house takes or the drift of the market. A sad chapter in a sad market life.


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