Interview with a Trader: Inside the Mind of Zozotrader
Michael DiRuzzo is his name, and he’s well known as “@zozotrader” or “Zo.” He’s been trading for 20 years now as a momentum, swing, and day trader. He is the Lead Trader and Contributor for @thetradexchange in addition being a Moderator and trader for @greatstockpix. The “@zozotrader” Twitter and Stocktwits handle comes from his high school football days where he was called “Zo” (no, he wasn’t that good).
Michael got the bug to get into the chef business long ago, so he went to culinary school and became a career chef… so ya, dude can cook! After burning out in kitchens and with the passion for food waning, he decided to get involved in trading. He now holds an Associates degree in Accounting and trades individual securities, ETFs and inverse ETFs on the Nasdaq and NYSE markets.
He took some time to answer some questions for me. This is his story:
What first influenced your interest in the stock market?
“I would have to say my Uncle Joe. He use to pick me up during the summer to give my folks a break from the kids for 2 weeks. I remember driving up to Brewster, NY to spend time with his family and he would have the radio on WCBS NY station, and he would listen to the business reports closely. As he was driving, I remember he always wanted to know what AT&T was priced at. He worked there and had stock in the company.
I would listen during the drive and would ask him questions. He would talk about investing and companies. This was back in the 70’s. He would talk about profits, earnings and the stock market. He would talk about dividends and how companies paid money out to you if you owned shares. He use to have me watch ‘The Louis Rukeyser show’… I was always fascinated with the intro with the ticker tape sounds, and by the folks sitting around that big wooden table talking business.
Each day I wake up with enthusiasm and love what I do. I treat trading like a job that I have passion for, but I keep in control. Yes, when I first started out, I had many trying moments; went through a divorce, looked out into the ocean and asked why I went through all the pain. Being a new trader was another stress added to the mix. I punished myself, did whatever it took to follow rules and drilled them into my head.”
What methods/strategies have you pursued that have failed for you in the past as a trader?
“My biggest failures came from buying stocks ahead of earnings. I was new to trading, and would read the reports. I would listen to the news about the company and think I had the earnings plays figured out. Of course, I would hit on some but then lose on others. This strategy failed more than it produced, so it had to be abandoned. When I think about it now – it was just pure gambling. There wasn’t any real chart work involved; it was just a guessing game.
The other strategy that was a huge failure was following others on their calls. I was new, so I felt I would just do what this guy is doing. If he was making money and I followed him, I was sure to win. Well that turned out poorly to say the least.”
When/what was your “ah-ha” moment? What was the breakthrough?
“Changing my mental frame of mind from swing trading to day trading by paying myself as a stock moved in my favor was a big moment. As a swing trader coming into day trading (that was a tough transition), was an ‘ah-ha’ moment in my thought process. When I could see and understand the trade for myself, that made all the difference for me.
I was investing in the 90’s in the dotcom companies such as DELL, INTC and MSFT and making good money swing trading. It was incredible what stocks were doing. The moves they would have were incredible, but then things changed. When you’re living something you never think of the worst. Most folks are positive thinkers, and during that time it seemed, ‘boy, this investing is great.’ You buy these stocks they have great stories of the future, so hold onto them.
Of course when you get complacent investing, you have to really watch out. The tide soon turned and the party was over. I didn’t get completely wiped out like many did, but it was a big lesson learned about stock trading. Greed kills you, or it teaches you a valuable lesson. You have to be emotionally detached and methodical.
So the ‘ah-ha’ moment came when I started taking some gains off the table by paying myself. Selling some of the position, and then holding some. I started to also look at charts. I had a computer with a couple of monitors (you know, those old, huge ones.) That lead me to something called day-trading; make money each day in the market. I was working back then and couldn’t do it full-time, so I put it to the side but always in the back of my mind. Who doesn’t want to work for themselves and be the master of their own fate?
So around 2004, I took some time for myself and started day-trading. I joined services, chatrooms and immersed myself into trading. Man, what a mistake that was (following someone blindly.) I did this off and on for about 3 years. You can imagine, the beating I took. I didn’t realize it at the time, but for the money I was losing, I was gaining it back in experience. I was paying my ‘tuition,’ as they say.
It seemed after the 90’s the markets had changed. Stocks gave nice gains but they could really hurt you with fluctuations. So that is when I became a day trader, and took money from the markets. The ‘ah-ha’ moment came in those years by not just following someone blindly, but seeing what was on the chart for myself. Like why was this guy always taking the high of day break when the stock had been basing for 20 min before and then got back up to the high of day? So the ‘ah-ha’ moment came when I wasn’t just a chaser any longer, but started picking my own entry spots. I played stocks into earnings, but didn’t hold through earnings. I didn’t over-trade like I had been doing in those services I had joined that were pumping out plays so quickly, they would make your head spin. Like a fool in the beginning, I tried to play them all – ouch!
By becoming selective, becoming a hunter looking for setups that I liked, this created that ‘ah-ha’ moment. It took 3 yrs to get there. Guess I was slow learner.”
How would you best describe your trading style?
“Momentum, swing, and day trader.
I trade 1-minute, 2-minute, 5-minute, and 15-min chart time frames.
I use base breaks, mostly flags.
My trading style now is patient – I don’t always have to be in a trade. I like to swing trade and day trade. Now, I am very much in control of my emotions. I will take a loss quickly, and not think twice because I keep them small. I go at each day as a business, a job. I trade stocks in the news, that are going to have earnings that day after the close, or have reported earnings that morning.
I trade stocks that are in play that have had moves and volume that week. I like to trade and be done within the first 2 to 3 hours of the day.
I take parts of positions off as the stock moves in my favor, typically selling in 1/3 or 1/2’s increments.
I play levels – I look at charts to find the area this stock must get above or close to, that will make shorts cover or where people will want to get in. I line my charts and watch those levels. I look at candle action, watching for topping tails or bottoming tails on the charts to get clues as to what levels are important on the time-frame I’m looking at.
At times, my goal is to evolve a day trade into a swing trade. Meaning, if I get in a stock that takes a nice move in my favor, I’ll attempt to hold and swing the trade since I have a cushion to try extend the gain. However, this is after I have sold off some of the position.”
What key rules do you apply to your own trading?
“The rules I apply to my trading are:
- You must be in control
- Don’t just follow someone blindly
- Anything can happen
- You don’t need to know what is going to happen next in order to make money.
- An edge is nothing more than an indication of a higher probability of one thing happening over another.
- Every moment in the market is unique.”
Recommended trading rules reading by Zozo:
What do you look for in the stocks that you trade?
“I want stocks with volume and liquidity. I mostly trade individual names and look for relative strength in sectors, and generally trade to the long side in my trading.
I want a stock with recent news or a sector in favor for that day. I’m looking for consolidation and a level that I feel puts bulls or bears in control of that individual stock, such as a base break up or down. I look for the level that puts the buyers or sellers in control of that stock and lean my trade to get the move up or down.”
What do you feel sets the great traders apart from the rest?
“There is no such thing as a ‘great trader.’ If you start thinking that way, the market will hurt you. If you start thinking you’re the greatest thing since sliced bread, you will soon be humbled.
You must stay in control and stick to the position size you’re comfortable with. Take a trade because you understand it. Sure, it may have been put on your radar by a chatroom or twitter, but you must do your own work on that stock. On a 5 min, daily, whatever time-frames you trade, make that trade your own. Take a trade and be able to explain it to yourself, or as if someone was watching you and asking you questions.
With that said, in my opinion the best traders are set apart as someone that puts the work in by looking at the market hours before it opens or the night before. Someone that treats it as a job and not gambling.
Someone who when understanding the trade, takes correct position size and can become mechanical in selling into gains, or taking small losses if the trade goes against you.
‘Don’t let any one trade make you or break you’ (Pretty sure that’s on a commercial)”
What can you tell readers about your risk management approach?
“Usually no more than 100 to 200 per trade (depending what 100 to 200 is to your account.) Some I can give a bit more room, but that’s usually enough to tell me I’m wrong. Either get out and play it again, or move on to another stock.
Don’t let your ego get in the way of a trade. When I go into a trade, if it takes out that level I’m looking for, I expect it to follow through. If I don’t get that, I become defensive on the name and give it some room to trade, but not a whole lot. I can’t remember the last time I took a full stop out. It comes over time in trading – you have a ‘market sense’ that you build through experience, so you know when you’re wrong, you feel it.
Let’s say I take 1000 shares of something. I’m selling if I get the move I want, in increments. Now depending on the time of day, this can vary. Is it my first trade of the day? A late morning trade? Am I up for the day? Am I down for the day?
If I’m playing a small stock, no way am I taking a hit of -.20 cents. Usually about .05 to .10 is plenty of room to know if I’m wrong. Larger stocks you have to give a bit more space; like a FB usually i have a .25 stop, but always adjust my position size accordingly to the stock I’m trading, the time of day, or how my day is going.”
What trading moments make you the most proud?
“I am currently with @thetradexchange and @Greatstockpix. I started trading in GSP’s service around 2004 and was losing money, but stuck with it. I had bought the lifetime membership, but was losing so would have to go back to work to make more money to trade. I kept studying day trading and would keep watching the videos GSP would put out each day or night (and still do.) I got the idea in about 2007 that I was going to put my own trades in the room, so that if they failed, someone would say ‘hey you did this wrong dummy.’
I used to post trades like ‘@@@XYZ long at 12.00 stop 11.89 @@@’ just to get them noticed. Well at first this wasn’t cool (laughing)… but these were trades that I had looked over and felt ‘hey this looks good to me and I think it is a go’… they started working, and folks liked them. GSP, who I think runs one of the best trading services, asked if I wanted to be a room MOD (moderator.) I was pretty proud then.
One other thing is we have a new MOD in GSP’s room, his room name is Okie and he’s from Oklahoma. He said on the mic one day that he ‘learned from GSP and Zozo, from the things he uses in his trading.’ That made me feel really proud.
After 10 years of doing that, The Tradexchange reached out to me, and I became their Lead Trader/Contributor. Another very proud moment.
I’m still in GSP’s room, and now in The TradeXchange service as well, both of which I am very proud of.
When I turn a trader around who is losing money, those are also proud moments.”
The most upset?
“My worst years were 2004 – 2007. I was more of a ‘gambler’ in my trading. I had the day trader bug; big bets and poor control. My trading improved after 2007, as I treated my trading more as a business and became more selective. I took the gambling out of trading by staying away from earnings plays prior to the report. Once I did that, my trading improved.”
What books, websites, or other resources would you recommend to those wanting to broaden their trading knowledge?
“The book I’d recommend is ‘Trading in the Zone‘ by Mark Douglas
Some Twitter/StockTwits Follows:
Sites I’d recommend:
Being the Lead Trader/Contributor for TheTradeXchange.com, what can you tell readers about this service and what benefit would they gain it?
“When George and Milton (the owners of @thetradexchange) first approached me, they had a vision of a service that would do a number of things. Their goal was a service that watched social media (because in today’s stock market, things like twitter can give movement to stocks.) Other things were unusual options activity. Now I’m not an options trader, but I see the movement that this information can give to a stock, and I have incorporated it into my trading. Not the specific options, but the volume it brings in to a stock as well as the movement. Options traders would obviously benefit greatly from this information.
They also do an ‘Actionable News’ stream with up-to-the-second information. News that is moving a stock at that moment. They also offer insider and company filings. They do this in a forum format, but also on a tool we call ‘The FEED,’ which allows you to see and search for news you may have missed or may want to look up. If that were not enough, we also have John, the audio news guy who gives out audio alerts about news on companies, options etc…
They charge 40.00 for all this, which is an unheard-of price. It is a hybrid service that gives so much value. I treat it almost like a scanner since it puts stocks on my radar that I might not have known about. Once traders try the service, they tell me its a tool they would truly miss now if they didn’t have it. It was ‘built by traders for traders’ and we always keep that in mind. They always look to push forward and enhance the service and add more useful features to it. They just completed the TradeXchange App – a great tool for mobile users.
Being a part of this service, as the Lead Trader/Contributor, has helped me find more stocks suitable to my trading style and has kept me better informed on company information.
I’m very proud to be a part of TheTradeXchange service. George, Milton and I have nothing but respect for traders and want to give them an important tool they can count on for a very reasonable price.”
What advice can you offer readers regarding position sizing?
“I think there is a saying that goes: If you’re screaming ‘oh my gosh,’ nail biting or begging for mercy, your position size may be too big. Or if you find yourself saying ‘please let me get this money back and I’ll never do this again,’ then the size you’re trading may be a bit too large.
You don’t have to play large position size to make a living in the stock market. I see in social media where folks proclaiming that they traded 50k shares on something. I’m sure they’re doing it, and when it works it is great, but most don’t tell you about the losers and how it feels when it doesn’t work.
The average trader doesn’t need more than 1k shares to make a decent living in the market. A new trader should trade just 300 to 500 shares and just try to be green each day.”
A lot of traders plateau and have trouble evolving beyond this level. What advice can you give to them?
The market is always changing, but if you stick to your core rules and maintain control, you will keep surviving the market.
Additionally, its okay to try new services if you’re in a rut. Always keep learning and trying to improve. If you don’t like trading gap plays in the morning and that’s what is hurting you, then stop playing them. Wait until after 10 am (ET) to trade or trade off a 15 min chart for entries.
The core rules will remain: stay in control, keep in mind anything can happen, and protect capital always.”
Now that you have developed into a successful and profitable trader, what are you doing to better your skill?
“I think what helps me the most now is finding trades for others. As odd as that may sound, its a lot of pressure to tell others each day by putting out trades ‘hey buy this stock here.’ It makes me more conscious of what I’m looking at before I call it within the service. Also during the heat of the trade, I may not be able to explain, but later if they have questions, I gladly go through it with them and mentor.
As a mentor, I do videos for folks on the indicators I use. I do webinars in GSP service and videos for The TradeXchange. This helps to hone my skills and gives me another opportunity to revisit my thought process and reinforces my methodology to the market.”
Below are a few sample videos Zozo has provided:
“I also write so that I can help mentor others. I do it so that they can avoid the mistakes that I made when I was a new trader.
Read: Stop Trading to Recover
By doing these things, it keeps me grounded and on top of my trading.”
Any habits or methods that you use that others might think is unorthodox?
“I start my trading day at 5:30 am each day. Not sure if that’s unorthodox, but I like to work into my trading day slowly. Reading and looking at charts. It works for me. I like the quiet of the morning to prepare for the day ahead. I start putting info into TheTradeXchange around this time and start absorbing information while looking at what I may trade and call for the service.”
For those who are just beginning to get their feet wet, what advice would you give or direction would you point them?
“Let’s see, I haven’t been new for a long time so this may be a tough one for me. Let me start off this way:
To me charts are the most important thing. So you need great charts. I like/love TC2000 charts – I have the Gold membership with real-time everything. I’m involved in TheTradeXchange, and in my opinion you will need a service like this. Since TX is the most reasonably priced one, why not start here? I’m all about keeping costs down for new traders, any trader for that matter.
If you are going to day trade and swing trade, keep 2 separate accounts for them if you can.
Expect long hours. You must think like an entrepreneur; this is your business and you must keep costs down. You have no boss watching over you telling you what to do. You have to be the boss to get yourself up each day to do the work. It is up to you to take the trade or pass on the trade – be selective.
Keep your losers small. Check that ego. Even if you think it was supposed to work and it didn’t, move on. You might have another opportunity if you are able to maintain self-control.
You are a new trader. You’re supposed to have losing trades in the beginning, because you’re still trying to discover what type of trader you are. When you first start, don’t try to make a living off of trading. You’re a student who is learning. Don’t take big share size. Keep a job at night and trade during the day. By keeping a job, you take pressure off yourself, which is a must. Control is the biggest issue. Try to find out what trader you want to be and learn all you can while you have a paycheck coming in.
This is not a get rich quick game. This is a job, a business and you want to keep treating it as such.
When you first start looking at charts, start with no indicators, no moving averages. Watch candles and volume. Keep it simple and watch the action. Draw lines of support and resistance.”
Zozo recommends the following links:
Any advice for those traders who are already successful?
“Listen, everyone has to make a living and if you are a successful trader, the best thing you can do is help someone who is starting out or going through a tough time. I understand time is money, and life is expensive but let’s keep services reasonable. If you want to run a service for trading or mentoring, don’t overcharge. Make a service that can help others at a reasonable price. I see so many services that charge huge amounts and give traders and Wall Street a bad reputation. ‘That guy charges 500/month for his service makes money off his subs.’ Lets keep it reasonable out there for traders. That is my goal and TheTradeXchange’s goal. Yes, we have to pay the bills, but we can do it and offer a reasonable price for members.
If you are successful, the greatest reward can be in helping others at a reasonable price.”
What would you like your “legacy” as a trader to be?
“My Dad just recently passed away and it was sad. Turns out, you find out a lot about a guy after he passes, funny how that works. He did a lot of helpful things for folks and they appreciated it. So in trading, I would like to be the guy that helped a lot of folks. I love when I can show someone an indicator that may help them or turn their ship around. Or be apart of a service that gives value to many. Something that is respected and useful.
As a trader, if they say ‘he took the time’ that would be awesome.”
I want to personally thank Michael for taking the time to share his thoughts on the above subjects with us. I’m sure his words will inspire many, in many different ways. Great insights here to apply to numerous styles of trading. Awesome attitude toward helping others.
Follow on Twitter @zozotrader