Invest and Trade Profitably with Jon Johnson

Education Center

How do you set your stop losses?

August 30, 2000

Stop losses are not perfect, but they are the best thing you can do to protect your gains other than buying protective puts on long stock positions. A stop loss is designed to automatically trigger a sale of a security when that security hits a target price. This works fine when the stock is gradually […]

We often refer to institutional buying as one of the indicators we look at. What are you referring to?

August 30, 2000

Institutions include mutual funds, insurance companies and the like-stock buyers that have lots of money and buy large blocks of stock. To get large moves in stock prices on stocks other than those with very small floats, you need to have institutions buying into the stock. When trying to determine whether institutions are buying, we […]

How much weight do you give institutional ownership of stocks?

August 30, 2000

Institutional ownership of a stock is where a large investor such as a mutual fund or insurance company owns a stock. For a stock to really make powerful, long-term moves, you almost have to have institutional sponsorship. Although individual investors are flexing their muscles and having their impact, on a stock such as CSCO with […]

When a stock hits a targeted entry point, do you place a market order, a limit order, a limit order at the bid or ask, or something else?

August 30, 2000

We only rarely, rarely place market orders, and that is usually when we are exiting a position with very good profit and just want to get out. Even then, we usually put in a limit order. Why? Because we have consistently been used and abused on market orders. Market makers have two minutes to fill […]

When would you buy a call over selling a put and vice versa?

August 30, 2000

A lot of the decision is based on personal preference and your brokerage account. Writing puts requires the proper amount of collateral in your accounts (for margin if non-IRA, and 100% cash for IRA accounts) and enough expertise for your broker to allow you to do it. Those who write a lot of puts tend […]

When you refer to average volume, what period are you using?

August 30, 2000

We use fifty days for our average volume determination. We have found this gives us an accurate look at a stock’s volume without over-emphasizing recent or distant moves.

What is a ‘weak’ holder of a stock?

August 30, 2000

We often refer to weak holders of a stock when discussing bases and breakouts. What often has to happen before a stock can move up is get rid of the investors who are inclined to dump the stock at the best opportunity to recover what they can of their investment. The are part of what […]

What is a cup with handle pattern?

August 30, 2000

The cup with handle pattern or base is a very strong base a stock can form. After a strong run, a stock will often correct and consolidate before it can move up again. Stocks form various patterns when they do this, some patterns being stronger indications of a potential strong move to come. The cup […]

How do I keep from selling too early?

August 30, 2000

A great question and one of the hardest. It goes hand in hand with how do you keep from selling too late. When a stock is moving up in new high territory, it has no overhead, so we tend to let it run. It will not run forever, however. It will have to come back […]

Do you use stochastics as a technical indicator?

August 30, 2000

Sometimes, but not often. Stochastics attempts to anticipate movements up and down in stocks. Stochastics uses a ‘fast’ stochastic line and a ‘slow’ stochastic line, and looking at when and where the two lines cross, an investor is supposedly able to anticipate if a stock is peaking or bottoming. The problem is, investors try to […]

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