Livermore thought cotton would rise, but the market hadn’t started yet—it kept hovering around 12 cents.
He couldn’t wait, so he bought 20,000 bales. After he finished buying, the market kept falling. Near the bottom, he cut his losses, losing $300,000.
A few days later it climbed back up. He started itching again, bought another 20,000 bales, and when it fell back down, he cut again at the very lowest point.
He repeated this cycle five times within six weeks, losing $2 million. Livermore got furious and told the manager to dismantle the cotton quoting machine.
Then two days later, the main upswing in cotton kicked off. It climbed all the way with basically no pullbacks.
He knew it in his bones, but he just couldn’t control himself.
You understand its logic, but before it has a chance to play out on its own, you think you can push it along. The result is that you become the very resistance.
Livermore’s third bankruptcy happened because he believed insiders’ information from so-called experts. He met cotton tycoon Thomas. Livermore originally had his own judgment, but Thomas talked with him a few times, fed him inside information, and convinced him to go long on cotton.
At that point, however, the market had already begun to weaken. Livermore went against his own sacred rule—trust the ticker tape, not rumors—and listened to other people’s messages.
Then cotton crashed. He didn’t cut losses right away; instead, he added more to average down his cost, buying more the more he lost. That’s how he ended up bankrupt for the third time. He sold two yachts to pay his debts and still owed $1 million.
He said this was the biggest blunder of his entire trading career, and that he had to stick to his trading discipline without fail.
He couldn’t wait, so he bought 20,000 bales. After he finished buying, the market kept falling. Near the bottom, he cut his losses, losing $300,000.
A few days later it climbed back up. He started itching again, bought another 20,000 bales, and when it fell back down, he cut again at the very lowest point.
He repeated this cycle five times within six weeks, losing $2 million. Livermore got furious and told the manager to dismantle the cotton quoting machine.
Then two days later, the main upswing in cotton kicked off. It climbed all the way with basically no pullbacks.
He knew it in his bones, but he just couldn’t control himself.
You understand its logic, but before it has a chance to play out on its own, you think you can push it along. The result is that you become the very resistance.
Livermore’s third bankruptcy happened because he believed insiders’ information from so-called experts. He met cotton tycoon Thomas. Livermore originally had his own judgment, but Thomas talked with him a few times, fed him inside information, and convinced him to go long on cotton.
At that point, however, the market had already begun to weaken. Livermore went against his own sacred rule—trust the ticker tape, not rumors—and listened to other people’s messages.
Then cotton crashed. He didn’t cut losses right away; instead, he added more to average down his cost, buying more the more he lost. That’s how he ended up bankrupt for the third time. He sold two yachts to pay his debts and still owed $1 million.
He said this was the biggest blunder of his entire trading career, and that he had to stick to his trading discipline without fail.