Trader in Championship Stocks with a return of 382%

  • Matthew Caruso started trading professionally in 2008 and then started doing it for himself in 2014.
  • After reading books, teaching a class, and doing it firsthand, he said discipline was key.
  • He shared the top four trading strategies that he thought every newbie should know.

Stock trading isn’t just Matthew Caruso’s passion – it’s most of what he’s ever done professionally.

His first job out of college in 2008 was as a trader for the National Bank of Canada. He was also a professor at Concordia University, where he taught a finance course focusing on technical analysis.

But since 2014, Caruso has been trading for himself. He is primarily a position trader who enters and exits stocks on an average three month basis. Position traders combine fundamental business analysis with chart-based technical tools and often hold stocks for months or even years as opposed to days or hours, which swing traders do.

While Caruso attributed much of what he learned to the books and his first-hand experience, he said discipline is the most important part of being a successful trader. Otherwise, he added, you would be hard pressed to stick to a specific strategy.

His discipline paid off in 2020, when he entered the US Investing Championship, an annual trading competition that has already attracted major investors, such as Paul Tudor Jones, David Ryan and Mark Strome.

From January to July 2020, at the heart of the historical history caused by the pandemic


, Caruso achieved a 382% return, as shown by the contest results and the monthly copies of Caruso’s brokerage statements viewed by Insider. In comparison, the S&P 500 gained 1% during this period and is up 42% from its pandemic low.

His equity positions included Fastly (up 381% over this period), Twilio (182%) and Pan American Silver (50%).

In an interview with Insider, Caruso shared the top four factors that informed his trading strategy and what he thought every newbie should know.

The 4 best strategies

Caruso’s first strategic tip: don’t waste a lot of money. It might sound obvious, but most people underestimate the emotional cost of trading, he said.

You don’t want to get emotionally attached to a particular action. And you have to be able to admit that you are wrong. If you enter a position and the price starts to fall, you should be comfortable coming out with a small loss, he added.

“This is called the asymmetry of losses,” Caruso said. “So if you lose 10% on your portfolio, and if you gain 11%, you can kind of get back to balance. But if you lose 50% of your portfolio, you need a 100% gain. to return to balance. “

If you can stick to this rule of thumb, you can limit your risks.

“I think the biggest advantage of any individual investor is that they can buy and sell stocks so easily,” Caruso said. “If you think of a pension fund that is trying to get into position, it has to buy for days or weeks at a time. So there is no reason for an individual investor to take a big loss.”

The second strategy is knowing when to get out. Caruso predetermines a defined percentage that he is ready to lose even before taking a position. And that’s an adaptive number, with the maximum amount set at around 5%.

As his profits increase, he reduces the percentage that he is willing to lose. This way, he can continue to increase his profits while staying in the game.

“I think a major mistake made by the vast majority of non-professional investors is that they enter the market and have only put part of the plan in place,” Caruso said. “So everyone usually thinks, ‘I need to know where I need to buy a stock. But that’s just the start of your journey. It would be the same as getting in a car and you just care about how to go straight. “

The third strategy is to understand how to read the signals. When using technical analysis, Caruso said, don’t just look at it like lines on a chart. You want to go beyond data and learn to interpret what high buying and selling volumes can mean.

The key indicator Caruso recommended paying attention to was the 50-day moving average. Traders consider it the most important indicator of whether the trend of a security is moving in either direction.

“If you’d just been like, ‘Look, as long as it’s above a 50-day moving average, I’m going to hold the stock,’ you’d have gone for several hundred percent advances,” he said. Caruso said. .

The biggest advantage of using this signal is that if a stock starts going down and you take action, you are unlikely to find yourself in a stock that drops at a drastic rate of 80%, for example.

Finally, knowing how to choose the winning stocks is a fundamental element of any trading strategy. Caruso focuses on two key data points: a company’s profits and its sales.

“You want to look for a stock that has either record profits or record sales and strong growth,” Caruso said.

Strong sales growth means a business has a product or service that customers really love, especially if it’s a record high level of sales, Caruso said. An even better discovery is if it is a new business, as it means that the business is more likely to exploit a new trend with significant future potential.

“And if that trend continues for six months, two years, three years, that’s where you get those 100%, 400%, 500% market advances because the market is paying for this business that continues to do so well. “said Caruso. .

When researching key companies, Caruso uses paid tools and websites to identify top performing companies. One of these tools is MarketSmith. But if you are not a regular trader, these tools can get expensive.

There are more affordable options, such as, or even the free Finviz website, which has analysis tools and filters.

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