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The Trend Breakout Strategy buys only when a stock finishes a pullback and breaks above its prior high on heavy volume. It follows the direction price has already shown instead of forecasting, and sells as soon as a pullback runs deeper than usual. It turns Jesse Livermore's principles into rules.
Born in 1877 in Massachusetts. At 14 he left home and worked at Paine Webber in Boston, writing prices on the quotation board, and learned price movement by memorizing the numbers.
In his late teens he made so much money betting on price moves in bucket shops that several of them banned him, which earned him the nickname "Boy Plunger". He later moved to New York and traded on the real exchanges.
He made about $1 million in a single day by shorting during the Panic of 1907, and about $100 million by shorting just before the 1929 crash. He also went bankrupt four times, and most of the rules he left behind came from losing money when he broke his own rules.
Reminiscences of a Stock Operator (Edwin Lefevre, 1923), based on his life, is still widely read, and his own book How to Trade in Stocks came out in 1940. He died the same year.
Livermore did not try to forecast the market. He followed the direction that prices had already shown. When buying and selling pressure tilts one way, he believed, price tends to keep moving that way.
So he did not try to buy at the bottom. Bottoms are hard to call, and a wrong call can keep getting worse. Instead he entered only when price broke through resistance, the moment he called the pivotal point.
The entry signal is a stock breaking above its prior high after moving sideways for a while. Volume should be much higher than usual. He treated breakouts without volume as likely to fail.
Do not buy the full position at once. If the first purchase shows a profit, add at a higher price (pyramiding); if it shows a loss, stop there.
Averaging down was the thing he forbade most strongly. He went bankrupt after breaking this rule.
If a pullback in an uptrend stays within its usual range (roughly 10 to 15% from the high), keep holding. If it drops deeper or trades unusually, sell without looking for reasons.
He said big money is made by sitting, not by trading. As long as there is no sign the trend has turned, do not sell on small swings; when the sign appears, sell right away.
Trade only the strongest stock in its group. A stock bought on a tip gives you no idea when to sell, so he did not use them.
This strategy model was independently built by Confluence Zone to quantify the investment philosophy in the works above. It is not an official model created, endorsed or reviewed by Jesse Livermore or any related institution. Last reviewed: 2026-09-29
Related terms: Moving Average · Trading Volume · Confluence
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