Livermore Pivotal-Point Breakout (simplified): does it still work? Replicated through 2026
We re-ran it on 10 markets from 2010-03-26 to 2026-11-10 (16.6 years, before costs): +5.7% a year, Sharpe 0.76, worst drawdown -23.8%. The benchmark, Equal-weight of 10 markets, did +9.6% a year (Sharpe 0.64, worst drawdown -43.1%).
Verdict: Smoother ride than its benchmark (higher Sharpe), but a lower return. Historical, hypothetical results before costs, taxes and fees. Not investment advice.
The originator never published a numeric rule. The parameters here are ours, an illustration of the idea. Do not read these results as the originator's results.
What is lost
- The 60-day window and the 10% stop are our parameters, not Livermore's.
- Pyramiding, tape reading, judgement about the market and shorting.
Where it comes from
Livermore is the archetypal speculator whose boom-and-bust life inspired generations of traders.
Rules, weights and thresholds are given as commonly cited. We have not re-checked them against the primary text.
The original rules
Buy when price breaks out of a long consolidation through a 'pivotal point' (a prior resistance), add only as it proves right, and cut losses quickly instead of averaging down.
How we replicate it
What we changed
Livermore never published exact numbers. This is OUR illustration of his method: buy when the close breaks above its prior 60-day closing high, sell when it falls 10% below the highest close since entry, with a fixed 1/10 slot per market. Pyramiding, tape reading and shorts are dropped.
The exact rule we run
For each of the 10 markets, at the close: when flat and the close is above the highest close of the prior 60 days, go long; exit to cash when the close is below 90% of the highest close since entry. Each market has a fixed 1/10 slot.
Conventions: Position decided at a close earns the next day's return; no look-ahead; before costs; cash earns 0%; starts 2010-03-26, the first day a signal exists; every market has an equal slot of equity; indicators use each market's own trading days.
Growth of 1 vs the benchmark
Benchmark: Equal-weight of 10 markets, same period. Equal slots in S&P 500, Gold, Silver, Oil, Natural gas, Commodities, Agriculture, EUR/USD, Bitcoin, Ether, rebalanced daily; a market without data yet stays in cash.
Drawdown from the previous peak
Key numbers
Sample: 2010-03-26 to 2026-11-10, 16.6 years, 5606 daily observations. Annualised from the number of observations per year of the strategy's own calendar. Before costs.
Recent and full-period returns
| Period | Replica | Benchmark |
|---|---|---|
| Last month | -3.3% | -7.4% |
| Last year | +8.2% | +5.9% |
| Last 5 years | +30.4% | +54.3% |
| Whole period (cumulative) | +151.6% | +357.2% |
Calendar-year returns
| Year | Replica | Benchmark | Replica minus benchmark |
|---|---|---|---|
| 2026* | +5.6% | +6.8% | -1.1% |
| 2025 | +9.1% | +18.5% | -9.4% |
| 2024 | +17.4% | +29.0% | -11.6% |
| 2023 | +8.0% | +13.9% | -5.9% |
| 2022 | -6.5% | -9.5% | +3.0% |
| 2021 | +25.6% | +54.6% | -29.1% |
| 2020 | +22.5% | +37.7% | -15.1% |
| 2019 | +11.2% | +19.2% | -8.0% |
| 2018 | -7.2% | -23.9% | +16.6% |
| 2017 | +14.6% | +52.2% | -37.5% |
| 2016 | +11.1% | +18.4% | -7.3% |
| 2015 | -6.1% | -12.1% | +5.9% |
| 2014 | -5.4% | -14.8% | +9.4% |
| 2013 | +0.3% | -4.0% | +4.4% |
| 2012 | -3.0% | +0.5% | -3.4% |
| 2011 | -3.2% | -5.7% | +2.6% |
| 2010* | +8.9% | +14.8% | -5.9% |
* Partial year. The first year starts on the first day of the replica; the current year is year to date.
Position as of 2026-11-10
| Holding | Weight |
|---|---|
| S&P 500 SPY | 10.0% |
| Commodities DBC | 10.0% |
| EUR/USD EURUSD=X | 10.0% |
| Cash (0%) | 70.0% |
Last change of position: 2026-11-04. Drawdown from its peak today: -5.7%.
What it did in 2020 and 2022
| Episode | Dates | Replica | Benchmark |
|---|---|---|---|
| COVID crash | 2020-02-19 → 2020-03-23 | -5.0% | -25.4% |
| 2022 bear market | 2022-01-03 → 2022-10-12 | -8.1% | -9.2% |
Close to close between the two dates. Two episodes only: not enough to judge a strategy.
How much to trust it
- 465 position changes over 16.6 years.
- This is one backtest on one path of history, before costs and with hindsight on the choice of strategy. It does not show the strategy will work in future.
Honest caveat
The 60-day and 10% parameters are our own illustration of a qualitative method, not Livermore's published rules.
Related
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Similar idea, tested on the site's own rule set; not the same rule.
Markets used: S&P 500 · Gold · Silver · Oil · Natural gas · Commodities · Agriculture · EUR/USD · Bitcoin · Ether
Historical, hypothetical results before costs, taxes and fees. Not investment advice.