Q&A: Lessons From a 30+ Year Trading Career

At a Glance:

• Success in trading is about suspending emotion and being adaptable, according to long-time trader Jim Iuorio.
• CME Group's Micro products offer both new and experienced traders a way to test strategies with less capital.

What makes a trader successful over three decades? For veteran trader Jim Iuorio, it's about sticking to timeless principles despite constant market fluctuations. Jim has navigated significant market events, from Black Monday to the global financial crisis, and witnessed the shift from floor-based to electronic trading. Along the way, he's gained a deep understanding of which trading strategies work best for him.

I recently sat down with Jim to chat about his journey, and he shared his perspective on discipline, adaptability and the enduring importance of risk management. Our conversation has been edited for brevity and clarity. The full interview can be found here.

Trading has its highs and lows. Can you share a particular moment where you felt lucky to be in this business and a time when you felt the opposite?

I started in July 1987, and in October of that year, the S&P cratered by a huge percentage in a single day [an event later called Black Monday]. I worked in currencies for Goldman Sachs, and we flipped over to the S&P pits to assist. I remember feeling like, “the whole world is watching these markets right now.” And it felt really cool to be at the center of it.

However, the Great Financial Recession in 2007 and 2008 weighed on me quite a bit. At that point, I was older and not as naive. It was incredibly stressful to see us capitalizing on market volatility while the rest of the world was going to suffer. So I didn't love that and would have liked to have been somewhere else at times.

You still work on the institutional side of the business, but you also have your own account. What’s your approach to personal trading today?

I've been trading my own account at the retail level for 25 years, alongside my work for institutional clients.

I think for anything that’s inside a couple weeks of hold time, technical analysis is more important than fundamental analysis. Fundamental analysis is great for portfolio construction and long-term investment, which I do a lot as well. I’d say I’m 70% technical analysis and 30% fundamental analysis. The fundamental aspect helps me rationalize or adjust my technical decisions.

CME Group has introduced smaller-sized products, like Micro Equity Indexes, and bolstered education for retail traders. What are your thoughts on these new products and tools?

I think the Micro products are fabulous, not just for newcomers but for experienced traders, too. It's not every trade that you want to "load the boat." There are so many trades where you just want to test a setup, which is easier to do with a smaller amount of capital. 

They also offer scalability – if you have ten Micro contracts on, you can get out of them one by one, giving you more pinpoint control. This flexibility allows you to test different strategies because, over the years, I’ve found that technical analysis strategies have a shelf life. One will work for a while, and then it will start to work less. It's important to move on once a strategy has run its course.

What’s the one piece of advice you’d offer to someone just getting into the trading space?

In the first half of my career in the trading floor environment, emotion benefited you – you would scream in the pit to get a trade. Screen-based trading requires you to suspend all those emotions. That’s why I would tell someone – before you enter a trade, you must clearly decide what the take-profit is, what the stop-out is or hedge it with options. Then, just put it on and don’t let your emotions play a role. I know firsthand that my emotions can sometimes get to me, so I like to use strict hedges.

In a lot of ways, a good trader is more a good risk manager – that’s almost a more descriptive way to say it.

There’s no question about it. There is a saying: “There are old traders, and there are really bold traders. But there are very few old, really bold traders.” Discretion is always the better part of valor.

By Craig Bewick