Unveiling the Trading Secrets of Legendary Trader Shapira

Meet Shapira, the seasoned trader who has weathered major market events like the dot-com bubble and the 2008 financial crisis. Renowned for his contrarian trading approach, Shapira has maintained a profitable track record for over 30 years with his unique insights and strict risk management practices.

Trading is no walk in the park, as Shapira emphasizes the complexities and risks involved. He reminds traders to tread carefully and shares how he leverages in-depth market data analysis and a distinctive understanding of trader behavior to achieve successful trades.

Shapira’s key strategy? Contrarian trading. By going against the crowd, he secures favorable risk-reward outcomes, standing out in a sea of conventional trading approaches.

Market data analysis and insights into trader behavior are Shapira’s secret weapons. His dedication to studying trader positioning reports (COT data) allows him to gauge market activity levels and anticipate potential shifts.

Risk management is paramount to Shapira, who sets stop-loss orders and regularly evaluates his portfolio to ensure positions are not overly correlated.

Self-reflection is a cornerstone of Shapira’s trading philosophy. He meticulously records all trades, learning from failures and swiftly discarding unsuccessful strategies.

For traders aspiring to follow in Shapira’s footsteps, he advocates adaptability, introspection, and resilience. Embracing failure as a learning opportunity is key to growth and success in the trading world.

From the tech bubble to the 2008 stock market crash, Jason Shapiro has been through it all.

The new wave of retail investors flooding into the stock market during the bull market that gripped the market for much of 2020 and 2021 is an all-too-familiar story for Shapiro.

History is repeating itself. Only this time, Shapiro has become a veteran trader with more than 30 years of experience and is no longer fooled by the hype. But he suspects many new retail investors have now lost much of the gains they made during the pandemic.

He calls himself a contrarian trader because Shapiro has always been different. To him, overbought markets are not determined by price, but by the number of participants betting on the same trade.

In more than 30 years of trading, Shapiro has been profitable for the past 23 years. He added that based on investment return data he and Business Insider previously reviewed, his average annual return was about 15%, with a maximum drawdown of 5%. In 2020, he was one of a series of traders profiled in Jack Schwager’s best-selling book Unknown Market Wizards, where he shared his contrarian trades View.

“I believe that going against the trend of mass participation can give you good risk reward trading. That’s my approach to trading. So, while I focus on fundamentals, I do it just to understand what other people think and why they They are all on one side of the market.”

 Disciplined Trader

The biggest truth Shapiro wants novice traders to understand is that the market is not an ATM. It has been very difficult to make money in the market for a long time. If a comparison is to be made, it is closer to gambling. You don’t get an advantage just because you’re the smartest person here, he said. There are already thousands of analysts and millions of traders using the same information.

 It’s a game of chance and you have to treat it that way.

However, you can improve your odds. But you have to be disciplined and have a rigorous process and stick to it. For Shapiro, this means trading only on a single thesis or pattern, while avoiding trades that are outside his comfort zone, even if he considers them a profitable bet.

“So I have a process where I basically only do one type of deal, and those are the only deals I do. I’ve been sitting in front of these screens for over 30 years and I see other opportunities, but I don’t do those , because I stick to what I’m good at, and that’s always helped me.”

He noted that there were also deals that worked at one point but eventually fell through. As Shapiro develops his trading strategy, he records all of his trades. He would look back at his history to see which strategies weren’t working, and then eliminate those strategies. That’s why he ended up with just one type of deal.

 Contrarian trader

The vast majority of people involved in trading lose money. Two pieces of wisdom can be drawn from this fact: First, don’t blindly follow the crowd. Second, you can take advantage of this hard fact.

“If I can figure out what these people are doing and take the opposite trade, then I can turn their losing money into my winnings.”

One way is to look at where attention is focused. Shapiro did this by looking at mainstream media headlines and social media. But he said talking and action are two different things. So his next step was to look at the metrics. One is the Commitment of Traders (COT) report, a weekly report published by the U.S. Commodity Futures Trading Commission (CFTC) that shows the short, long and arbitrage positions of U.S. futures market participants. He also looks at the call-to-call ratio. This allows him to notice which positions are overcrowded. Then he would do the opposite deal.

He will also use other data for confirmation, including fundamentals, headlines, or support and resistance indicators, which provide additional clues as to why the market is moving in a certain direction.

 Safe trader

Traders must remember that they are trying to predict the future, which is impossible. That’s why risk mitigation is key. Shapiro’s first way to limit risk is to set stops based on the amount he’s willing to lose on each position, which, he notes, is about 70 basis points. Exit signs should vary from person to person and depend on the thesis of the trade. For example, if you are trading based on a support line, your stop loss should be triggered when the price falls below the support line.

“If I were to guess, 80% of the time you would wish you hadn’t been stopped. But the other 20% of the time it would save you from total ruin.”

Some traders set their stops based on a percentage or ratio they are willing to risk. Shapiro thinks this is a bad idea because it means you’re trading randomly. It should depend on one question: At what point does your argument become wrong, and if so, how much loss are you willing to take?

He points out that leaving room for slippage is because stops don’t always execute at the exact price point you set.

His second way to mitigate risk is to review his portfolio to make sure his positions are not too correlated. For example, he often tries to maintain a long and short position in a related sector to remain market neutral.

 Shapiro’s 15 Investing Quotes: Trade Like a Market Wizard

Want to know how Shapiro went from being kicked out of three high schools to managing hundreds of millions of dollars? This pioneering trader has been changing the financial game since 2003. Below, let’s take an in-depth analysis and interpretation of Shapiro’s 15 most wise trading quotes. This will provide you with his unique strategies and insights.

1. “Trading the markets is very, very difficult. If you don’t take this seriously, your chances of making a positive return over time will quickly approach zero.”

In this quote, Shapiro issues a stern warning: Trading isn’t easy.

It’s a complex, intricate game with extremely high stakes. If you jump into an investment trade without a full understanding, your chances of making a positive return will shrink faster than a snowball in hell.

Shapiro’s words serve as a wake-up call for traders: “Be careful: You need to know the market well.” It’s about developing a sound investment strategy, being realistic, and not being afraid of failure. It’s about daring to be different, taking calculated risks, and building your own safety net.

 Over confidence? A quick profit mentality? Shut out these thoughts.

Shapiro’s advice is a stark reminder that trading is not the golden key to wealth. It is a challenging undertaking that demands respect.

2. “I succeeded because I failed many times and I was open to failure and able to learn from it. I failed because I was terrible, not because the market was wrong or because someone cheated me. Or any other excuse you hear.”

Shapiro’s famous quote from Jack Schwager’s “The Untold Wizards of the Markets” demonstrates the transformative power of failure in the world of trading.

Remember when he jumped into trading during the bull market and made a fortune of $700,000? He even bought a sleek new Porsche!

 But when the market plummeted, so did his fortune.

Rather than blaming the market or anyone else, Shapiro took a hard look at himself. He admitted his mistake, and this humbling realization changed the course of his life. His willingness to accept failure and learn from it is his ticket to priceless trading wisdom.

This story is a stark reminder that being a successful investor is more than just making a lot of money. It requires adaptability, introspection and resilience. It requires recognizing that losses are more than setbacks—they are stepping stones to perfecting your strategy.

3. “I started looking at the data, testing it, and have been using it extensively ever since.”

In this quote from Shapiro, he shares the importance of COT data in his trading strategy.

Shapiro first encountered Commitment of Traders (COT) data after unsuccessfully shorting stocks during the 1999 Nasdaq bull market.

Unfortunately, this bold move was unsuccessful. He was swimming against the tide of optimism, but was missing a crucial piece of the puzzle—the right data. COT is the best example. The U.S. Commodity Futures Trading Commission (CFTC) releases detailed data on futures market positions every Monday.

The data could have served as Shapiro’s compass, leading him to make smarter investment choices and potentially protecting him from a severe financial hit.

After this epiphany, Shapiro dove headfirst into COT data. To this day, he still uses this savvy approach to spot crowded markets and the profit opportunities they offer.

4. “You should be able to predict whether the market will go up or down 30% of the time and make money. Because you should make a lot of money when you are right and lose a small amount of money when you are wrong.”

Shapiro has his own risk management strategy, which involves looking for crowded markets through Commitment of Traders (COT) data.

 But what is a crowded market?

Imagine a market filled with speculators, all betting on the same side. Shapiro believes this is a ticking time bomb that could explode at any time and cause the market to reverse. He’s right there, ready to pounce when the market reverses.

He waits — which is what happens when predicted market trends take an unexpected turn.

When markets move against expectations, Shapiro swoops in like a hawk. He enters the market near the close, placing his stop loss below the day’s pivot point.

This strategy was his golden ticket, allowing him to profit from accurate predictions and avoid losses when his predictions were wrong.

5. “I felt like something was missing from my life. The only thing I could think about was trading. That’s what I’ve done for 25 years of my life and what I’m best at. I thought I could be the best in the world One of the traders. So why don’t I do it?”

In this powerful reflection, Shapiro opens up about his time battling depression.

He traces it back to when he left the trading world, a field he had devoted 25 years to. Convinced of his ability to become one of the world’s elite traders, Shapiro knew this world was his destiny.

The revelation is a wake-up call for traders around the world. It reminds us that trading is more than just a job, it’s a calling. It’s not just about numbers and charts, it’s about passion, confidence and the courage to chase your potential.

6. “I believe that going against the crowd will give you a good risk-reward profile in your trading.”

Contrarian Shapiro dares to be different. This quote sums up his trading philosophy: buck the trend and profit from it.

He meant what he said, both literally and figuratively. Shapiro’s rebellious streak runs deep, and his history of rebellion includes being expelled from high school three times.

His extraordinary experience proves that contrarian trading is not about standing out, it is about questioning the status quo and digging deeper for hidden value.

For traders, this is a lesson that teaches them to think for themselves, analyze thoroughly, and be bold in making potentially rewarding but unpopular decisions.

7. “While I focus on fundamentals, I do so only to understand what others are thinking and why they are all investing heavily on a certain side of the market.”

Shapiro has cracked the code on knowing the pulse of the market. He developed a unique trading strategy that focuses on studying how other traders behave.

What’s his secret? Recognize when the market is active, whether for short or long positions.

The key to understanding market movements, Shapiro believes, is understanding why traders are flocking to a certain side. He believes this gives him an edge and insight into potential market changes.

He did not keep this strategy secret. He created a report called “The Crowded Market Report.” Here, he shares his insights and teaches traders how to read market sentiment and make smart trading decisions based on how crowded the market is.

8. “So I have a process that basically only does one type of trade, and I only do that type of trade. I’ve been sitting in front of these screens for over 30 years, and I’ve seen other things, but I don’t Will do it because I stick to what I do and it helps me.”

What is his secret to successful trading for 30 years? Focus on a single type of transaction. If that doesn’t count persistence and self-discipline, then I don’t know what does.

But why listen to him? Shapiro hasn’t experienced a single loss in more than 20 years. Yes, you are not mistaken. In the world of trading, this is as rare as a unicorn!

The lesson for traders here is clear: Don’t be fooled by shiny new opportunities. Sticking to your tried and tested strategies is the key. It may be tempting to dabble in different types of trading, but it’s a risky game.

Instead, you should hone your skills on proven strategies. This approach not only reduces risk but also puts you on a path to steady growth.

9. “If I can figure out what those people are doing and trade against them, then I can take their losses as my profit.”

This quote from Shapiro illustrates his bold contrarian trading strategy. He danced to the beat of his own drum, thumbing his nose at the crowd. How did he do that?

He closely monitors news, trends and Commitment of Traders (COT) data to study the behavior of the majority. Shapiro then made a reverse trade, betting on Volkswagen’s mistakes. This bold strategy allowed him to profit from the public’s mistakes.

Shapiro’s approach is a wake-up call for traders. It emphasizes the power of independent thinking and the dangers of blindly following the crowd. It reminds us that informed decisions come from multiple data sources.

10. “If I had to guess, 80% of the time you would wish you hadn’t been stopped. And the other 20% of the time, you would have avoided total ruin.”

Shapiro’s quote introduces us to a smart risk management strategy that includes setting a stop loss.

This strategy is a safety net for traders; it is the predetermined loss point at which traders decide to exit a position to avoid further financial losses.

Shapiro revealed that his safety net is set at around 70 basis points. Of course, 80% of the time, traders may regret it when the market rebounds after hitting their stop.

But the best part is: the other 20% of the time, this strategy is the hero, quickly saving traders from catastrophic financial losses or even getting wiped out. It is the nameless guardian that prevents liquidation.

11. “I don’t get into bad trades; I just get stopped out. I may miss trades because I’m stubborn. But I never violate my stop. So, I’ll never get into those situations again ”

In this quote, Shapiro further emphasizes the critical role of stops in the volatile world of trading. He sticks to his golden rule – never violate your stop loss. This strategy is his safety net, his escape hatch from trading down rather than up.

His relentless attitude may mean he misses some opportunities. But to him, that was a small price to pay compared to the possibility of catastrophic losses.

This wisdom was not taught to him by others. This was a lesson he learned the hard way in his early years in the trading trenches, when he suffered significant losses, or, in traders’ parlance, “a bust.” All this could have been avoided if he had cut his losses.

So, we should learn from Shapiro’s approach. Let us insist on cutting losses and save ourselves from the financial abyss.

12. “When investors talk to me about my risk management, they ask, ‘Do you use value-at-risk?’ I tell them I don’t because I think it’s garbage.”

In this quote, Shapiro casts doubt on the value-at-risk (VaR) approach to risk management. He believes the method is unreliable because VaR relies heavily on historical correlations, which can last anywhere from 30 to 90 days or even longer.

In volatile markets, these correlations can collapse in as little as 48 hours. Therefore, VaR cannot accurately depict current risks.

By the time VaR catches up with a sudden change in correlation, it is often too late to effectively manage risk. Therefore, Shapiro recommends that investors avoid using VaR as a risk management technique.

13. “COT is not a perfect indicator. There has never been, and never will be, a perfect indicator. However, because I lost so much money in the market and made so many bad trades, I just can’t make a non-contrarian trade.”

Shapiro knows Commitments of Traders (COT) data is not perfect. However, he relies heavily on it.

Why? Because like the legendary Jim Chanos or the famous David Swensen, he was a total anti-trend. Shapiro has a knack for swimming against the tide, keeping a close eye on the bustling market. COT data? It’s his compass that allows him to stand out from the crowd.

This strategy stems from his past experiences and his unwavering belief that there is no magic bullet in trading. He firmly adheres to the stance of contrarian investment and is not affected by changes in market trends.

14. “By definition, it’s impossible for everyone to get outsized returns. So if everyone is doing something, the only way to get outsized returns is to be on the other side. The great thing about markets is that I can Wait until confirmation before taking a contrary position.”

 Shapiro’s quotes offer a glimpse into his unconventional approach to trading.

What is his philosophy? You can’t beat the crowd just by following the crowd. Why? Because the market does not allow everyone to perform well. So to reap enviable rewards, you must dare to be different.

Shapiro waits for the market to reveal its cards before taking action—in the opposite direction of the market. It was a risky strategy that allowed him to seize opportunities that others might have missed. This could lead to bigger wins. His strategies are a bold reminder of the power of independent thinking and patience in the world of trading. It’s not about rushing, it’s about waiting for the right moment to strike.

15. “People give up when they fail: they get scared. For some reason, I have a risk instinct. I hate failure, but I don’t mind taking a risk and then failing.”

Shapiro advocates boldly accepting risks, even when failure lurks in the shadows. This mentality is a game-changer for traders who often teeter on the edge of risky decisions.

Consider Shapiro’s friend, a lawyer who despises his job but is paralyzed by fear of leaving. This story perfectly encapsulates how the fear of failure can keep us stuck in a cycle of stagnation.

Shapiro urges us to welcome failure not as a disaster but as a potential outcome of risk-taking. This perspective is the springboard for trading growth and success.

What’s the lesson here? Face risks bravely and accept that failure may come at any time, but remember: failure is a stepping stone, not a stumbling block.

 in conclusion

These words of wisdom from Shapiro reveal the secrets behind his highly profitable contrarian trading approach. He deftly seizes opportunities that others overlook by paying close attention to the movements of the crowd and changing direction when they do.

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