Trader Spotlight: Matthew Caruso

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Matt Interview

Disclaimer

The examples presented in this article are only to be regarded as a technical demonstration when used with the trading system. Accordingly, these examples should not in any way be construed as a recommendation for any type of trading strategy and they do not constitute any form of advice as to the advisability of investing by the use of any trading strategy. Any Investor who uses a trading strategy must build a trading strategy on the basis of independent testing and according to their specific requirements and needs.

Matt is an extremely experienced trader. After years of working as a market maker, he decided that his skills could just as-well be used for trading independently. He hasn’t looked back since.

We were happy for the chance to speak to him about his trading process and experiences!

 

Hey Matt! For our readers, could you tell us a little bit more about your personal and professional background?

Sure thing! Since I was a kid I’ve always been interested in the stock market. My dad even let me make a few trades from his account when I was too young to trade myself. I was lucky that my first job out of university was as a market maker – I worked for one of Canada’s largest banks for 6 years. However, at some point it hit me that it’d probably be much more profitable for me to use my skill set to trade for myself, and I’ve been doing that since 2014.

In 2020 during the beginning of the pandemic, I also got a-lot of exposure as a trader in the US investing Championship (I broke their previous all time 9-month record), and here we are today. I put out my own trading course last year which was well received, and I enjoyed creating it immensely.

 

First thing’s first (we always ask this) – What’s the worst mistake you ever made trading stocks?

I fell in love with the story behind a group of stocks at some point. I think everyone whose a novice goes through that. I broke my risk rules and almost blew up my account. Most big traders usually say they blew out once or twice, but lucky for me I jumped ship at the last moment.

The year after that was a great one and I made up for it, but got a glimpse into a possible future and it was pretty ugly – forgetting my risk rules and listening too much to the story was nothing but trouble.

 

What are the key variables you look for when analyzing the market? Do you tend to favor Fundamental Analysis, Technical Analysis or a homemade mix of the two? Quant? Voodoo magic?

I’ve tried pretty much every style you can try and I’ve read every book I could get my hands on, and I’ve shifted strategies over the years.

What I really focus on now is the growth method that William O’neil popularized with his books.

It’s really a combination of fundamental and technical analysis, but over my years I’ve also learned a lot of useful short term techniques and strategies. My trading style is more tactical and aggressive, so I personalize these methods to make them my own. I’ve even designed some algorithms myself.

I always like to start by understanding the company’s story, and look for companies that are already performing great fundamentally, and  I then can then see if my chart analysis can confirm it that the trend is likely to continue.

Paying attention to both the story and the chart provides me my way of when to buy and how to control my risk. The chart can look as good as it wants to, but if a company isn’t executing or growing, and is going to start losing money, that chart will eventually fall.

 

What’s been your most successful trade so far? Walk us through it.

My best of all time was in 2020 with Livongo.

I traded steel and gold in the banks for many years, so I have a good understanding of monetary policy in those regards. I remember with the Covid panic of March 2020, the federal reserve stepped in and said “we’re cutting rates to 0, we’re starting a quantative easing program, and we are setting the the bank reserve requirement to 0,” I thought to myself that this is unprecedented and powerful. The bear market is over.

I immediately thought that this was all going to be like a war, just a health war. So I looked back at other war periods like 1914 and saw that Steel stocks had incredible runs during WW1 (as I’m sure you can imagine), and I thought to myself what would be the equivalent in a health war?

So I began researching which companies could benefit from something like that and are already on a good trajectory, and Livongo hit the mark. I bought at 27 and sold at 144 after they got taken over.

It was planned out, methodical, the technical tools clicked in to confirm my thoughts, my risk was in check, and for me it was a 10 star trade. Perfect place perfect time.

 

What do you do to deal with the stressful nature of trading? How do you keep emotions out of it?

I’ve only ever traded, it’s all I’ve ever done. I think you slowly build up a tolerance.

When I was in my 20s it was easier because I wasn’t married and didn’t have kids – I never wanted to lose money, but for me, I love the process of trading. Whenever I lost money I wasn’t stressed – I was just focused on “what went wrong?” and “what can I do better?”.

After you have the added pressure of a wife and kids, then the stress begins, so I began designing my risk better and using tools to help limit it. I’m a big fan of concentrated positions, if my stock doubles and I have 5% of my account, I get a whopping 5% return on my portfolio – it doesn’t affect me. To get the results I need I use concentrated bets.

I never buy all my stock in one purchase, I work in the same manner institutions do: They buy positions for weeks and months, you don’t build a billion dollar position at once, and I want to incorporate the same logic. I start my position and slowly build it the more I’m proven correct, slowly but surely buying at tactical positions.

That’s not to say I haven’t had had my fair share of sleepless nights. All traders have them no matter what they say, so I really went and made my position building system to match my risk tolerance so as not to keep myself up at night.

 

Do you have any experience with trading automation?

I do, it’s extremely interesting. It’s such a monster part of the market right now.

When I started off and was dealing with smaller market cap stocks, algorithms weren’t such a big deal, but slowly but surely it evolved. We always knew there was something there, but banks are not a place for innovation unfortunately.

I actually joined a small broker/dealer where automated trading was a central part of the value offering. Obviously, we couldn’t always compete in terms of speed, but I programmed some of the basic logical market actions we were taking.

Daytrading is much harder nowadays, I think retailer investors would benefit so much from riding trends for days or weeks, and really really short term daytrading is fighting a losing battle.

 

Last but not least, give us parting words of wisdom: What are some things you wish you would have known when you started trading?

If there’s one thing I would tell myself, it’d be to pick a strategy that can compound your winnings, so you’re not going to get capped down the line.

The niche that I specialized in for a long time was small cap stocks, and it got to a point where I was too big in my trading to grow anymore. So on the one hand, I had this great business at a certain point, which was as easy money as the market could give me, but I noticed that I was plateauing. This forced me to pivot and expand my niche, which is something that’s very hard to do and time consuming to do.

That’s why it’s important that whatever you choose, you have the foresight to look down the road and pick a strategy that can compound your wealth, and still leaves a-lot of room for growth.

 

Thanks again for joining us for this interview!

Readers: if you’re interested in learning more about Matt’s methods and strategies for trading, you can check out his course Here – it’s full of invaluable insights!

 

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