Ep. 228 Jason Shapiro: How This Contrarian Strategy Gives You A Trading Edge
Aug 3, 2023
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Jason Shapiro, founder of Crowded Market Report, shares a contrarian approach to investing in futures markets and the signals he uses to go against the crowd. They discuss the current market state during earnings season, the impact of reading Market Wizards books on their trading career, and the importance of timing and risk management in trading. Jason also analyzes commitment of traders reports and currency positions, and shares book recommendations and interesting life experiences.
Jason Shapiro uses a contrarian approach to investing in futures markets, focusing on positioning rather than price.
Shapiro pays close attention to market signals like news failures to identify potential reversals in trends and manages risk in trades using market confirmation and defined stop levels.
Shapiro emphasizes the importance of keeping a trading diary to track effective strategies and highlights the significance of market confirmation and commitment of traders data to enhance risk-reward decisions and avoid unfavorable market conditions.
Deep dives
Contrarian approach to trading
Jason Shapiro shares his contrarian trading approach, which focuses on positioning rather than price. He looks for crowded trades and fades them by taking the opposite position. He uses the Commitment of Traders report to determine crowded positioning in markets.
Reading market signals
Shapiro pays close attention to market signals such as news failures. He looks for instances where the market does not react as expected to news, indicating a potential reversal in trends. By using market confirmation and defined stop levels, he manages risk in his trades.
Current focus on the dollar
Shapiro is currently observing crowded positioning in currencies such as the Euro and the Pound, where commercials are short and speculators are long. He is looking for a news failure that could trigger a reversal. Additionally, he is monitoring the dollar index, which is showing neutrality but could potentially become the most crowded short position.
Developing a Process based on Trading Diary Insights
The speaker reflects on their trading journey, which involved losing money despite reading various trading books. They realized the importance of keeping a trading diary to track what strategies consistently worked over time. By reviewing their diary, they were able to discard ineffective strategies and focus on those that yielded positive results, leading to the development of their current trading process.
The Value of Market Confirmation and Commitment of Traders
The speaker emphasizes the significance of market confirmation and the commitment of traders data. They recount a personal experience of shorting the stock market in the late 90s before the dot-com bubble burst. By analyzing the commitment of traders report, they could have avoided their losses as the report would have signaled against shorting the market until January 2000. The commitment of traders data not only enhances risk-reward decisions but also helps to avoid getting caught in market bubbles or unfavorable market conditions.
This week on the “Investing With IBD” podcast, Crowded Market Report founder Jason Shapiro shares a compelling contrarian approach to investing in futures markets and how the signals he uses to go the opposite direction of the crowd give him an edge. Plus, the crew takes a look at a few recent currency trades that have paid off.