Elite Trader Insights: Dan Shapiro

Episode 3: How to handle trading losses & grind through slumps | Dan Shapiro

Each week we try to unlock the collective wisdom of the Trading Elite. Strategies and unique insights from hours of interviews with top traders, sliced into bite-sized pieces and delivered to your inbox for your pleasure.

Dan Shapiro

Coming up from humble beginnings, Dan called on the neighborhood loan shark to fund his first trading account, which got him through the door to one of the largest prop firms at the time. This is where he rubbed shoulders with many phenomenal traders, who helped shape him into the trader he is today.

This interview is ultimately focused on the mental and psychological aspects of trading. We discuss some of the darkest moments from Dan’s trading career, how to handle losses and grind through slumps, trading the setup and not your PnL, and why you should care more about trading right, rather than being right.

In the interview with Dan Shapiro on Chat with Traders Episode 66, numerous valuable insights and actionable advice were shared for both new and experienced traders. Here are the most significant takeaways from the interview:

1. Focus on Pivots and Supply/Demand Zones: Dan emphasizes the importance of understanding pivots and their relationship with supply and demand zones in trading. A pivot is a potential shift in direction on a chart, and when combined with supply or demand zones (like moving averages, Bollinger Bands, etc.), it can indicate significant trading opportunities.

2. 60-Minute Timeframe Over One-Minute: Dan advises against the common practice of using one-minute charts due to their noise and volatility. Instead, he recommends focusing on a 60-minute timeframe, which offers six pivotal candles per day and reduces noise, allowing for more strategic and less reactive trading decisions.

3. Trade High Beta Stocks: Dan focuses on high beta stocks, like the FAANG group (Facebook, Apple, Amazon, Netflix, Google), due to their large ranges and ability to be traded on both sides of the market. These stocks often respond well to market movements, offering lucrative opportunities.

4. Risk Management: Dan suggests that traders, especially those who are new, should not risk more than 1% of their account size on a single trade. This approach helps in managing risk and avoiding significant losses.

5. Position Sizing: Position size should be determined based on the distance between your entry point and your stop-loss level, ensuring that the maximum loss does not exceed your predetermined risk level (like 1% of your account).

6. Avoid Overtrading and Emotional Trading: Overtrading, especially in response to short-term chart movements, can lead to unnecessary losses. Traders should focus on setups that meet their criteria and avoid emotional decisions.

7. Patience and Screen Time: Dan highlights the importance of patience and the need for substantial screen time to gain experience. He stresses that there’s a learning curve in trading that can only be overcome through consistent practice and observation.

8. Self-Reliance Over Social Media Hype: Shapiro warns against the pitfalls of social media, where many traders boast unrealistic successes. He encourages traders to focus on their own learning and strategies rather than getting swayed by others' claims.

9. Regular Review and Adaptation: Regularly reviewing trades at the end of each month helps in understanding what worked and what didn’t. This process is crucial for continuous improvement and adapting strategies to changing market conditions.

10. Invest in Good Tools and Education: Investing in quality trading tools and platforms is essential. Shapiro recommends using tools like eSignal and Trade Ideas for chart analysis and real-time data. He also emphasizes the importance of continuous learning and staying updated with market trends.

This interview offers traders plenty to refine their strategies, manage risk, and develop a more disciplined and informed approach to trading.

Cheers

Marto