Jesse Livermore
1877–1940 · US stocks & commodities · Known for: Shorting the 1907 and 1929 crashes
Strategy you can use
Pivotal Point Breakout
Wait for price to break a clear 'pivotal point' (a key prior high or consolidation top) and add to the position only as it proves you right.
- Style
- Trend / breakout
- Timeframe
- Daily & weekly
- Markets
- Stocks, index futures, commodities
- Level
- Intermediate
1. Setup
- 1Trade only the leading stocks in the strongest sector.
- 2Mark the top of a multi-week consolidation or prior swing high as the pivotal point.
- 3Require rising volume as price approaches the level.
2. Entry rules
- 1Buy a 'probe' position (≈20% of planned size) on a daily close above the pivotal point.
- 2Add a second 20–30% tranche only if the trade is in profit.
- 3Complete size on the first pullback that holds above the breakout level.
3. Exit rules
- 1Exit fully if price closes back inside the old range.
- 2Trail a stop under each new higher swing low.
- 3Take partial profit on climactic volume after an extended run.
4. Risk management
- 1Never add to a losing position.
- 2Initial stop ~1–1.5× ATR below the pivotal point.
- 3Total risk per idea ≤ 1–2% of account.
Common mistakes
- Buying before the breakout 'on a hunch'.
- Averaging down.
- Overtrading in choppy, trendless markets.
An educational interpretation of publicly known principles, not the trader's exact proprietary method. Backtest and paper-trade before risking real money. Not financial advice.
The story
Livermore started as a teenage quote-board boy in Boston and began trading in bucket shops, where he learned to read price movement on the ticker tape.
He made fortunes shorting the market in the panic of 1907 and again in the 1929 crash, but also went broke several times by breaking his own rules on position size and overtrading.
Lessons for traders today
- Let winners run and cut losers quickly.
- Over-leverage can wipe out even a brilliant trader.
- Wait for the market to confirm your idea before committing size.