"Jones Keeping Up with Investments"
A Profile of Samuel Jones

Keeping up with his own investments important decision for former science teacher turned IT professional.

Sam Jones

Sam Jones didn’t start with a lot of money on a science teacher’s salary in Rhode Island in the mid-1970s and then as an information technology professional for the last 20 years, but he did make one big decision early in his working career: He wanted his future and his retirement to hinge on his own ability to navigate the markets successfully and not on someone else’s investment decisions. Today he is fully involved in the financial markets after producing a modest income from trading over the last 25 years, the result of studying market behavior and developing money management techniques, and he still has time to satisfy his salt water fly fishing habit from time to time.

Swing Trading Style
Jones says he is neither a day trader nor a buy-and-hold position trader.  “With very few exceptions, buy and hold just doesn’t cut it any more” Jones contends. Instead, he is a swing trader in exchange-traded funds, ProFunds, equities and options. On average, he closes out about 20 trades a month. 

Jones uses fundamentals to help determine the long-term trend and then relies on technical indicators and tools almost exclusively to time his trades within the larger cyclical trends, either up or down. He views precious metals and the energy sectors as being in long-term cyclical bull trends with consolidations several times per year.

"These consolidations provide opportunities to maximize profit by selling before or buying during the move,” he says. “I may try to reduce a position before a consolidation phase and add toward the end. Timing obviously becomes critical with this strategy. Housing and real estate may be entering a long-term consolidation, which I am shorting now, so I trade both long and short.” 

Jones likes to see a sector basing. When that occurs, he legs into a market with a small position. Once the new trend becomes more established, he adds to the position. If the trend does not materialize, he gets out as soon as he can.

Basic Tools
He uses moving averages of various time frames, money flow indicators, volume, relative price and Bollinger Bands. He also refers to Fibonacci levels, mainly “because so many other traders use them and it is helpful to understand them.”  These basic tools, as well as support and resistance levels, help him detect trend changes more often than not, he says. 

Once in a position Jones uses VantagePoint Intermarket Analysis Software to evaluate his position continually and waits for notification of a potential trend change.  With VantagePoint’s ability to analyze related markets, Jones gets insight into pending trend reversals so he can cover his positions.   

Jones admits that, like most traders, he sometimes hangs on to a losing trade too long because “I am convinced that I am right and the market is wrong.”  Managing winning positions can be equally challenging, he adds, because it’s easy to get too emotional about a position if you’re not careful. 

“After a 30% gain, I increase the amount of attention I give to the position and start to plan my exit," Jones advises. "That doesn’t mean I get out; it just means that I become more observant. It also depends on other investment opportunities as well and my cash position at the time. I do not have a clear-cut rule because of all the dependencies.” 

Money Management’s Role
As part of a money management strategy he has developed over the last 25 years, he always keeps at least 10% cash flow for flexibility.

“If I get close to that level, then I may reduce one or two of my weaker holdings to always keep some powder dry,” he says, adding that the amount he invests in any one sector is based on trend strength relative to other sectors.

He places a great deal of emphasis on capital preservation, which he regards as the most important objective of trading.

With the large amount of information available on the internet, this is a great time for investors, Jones believes, but he also warns that traders can have too much information thrown at them. His favorite websites include www.Stockcharts.com and MorningStar, and he also visits free sites such as Yahoo! Finance and www.TradingEducation.com.  More expensive information doesn’t necessarily make it better, he advises, and he encourages traders to check out free resources as viable sources of information.

Jones enjoys John Murphy’s market messages and has found that www.Stockcharts.com, Stocks & Commodities magazine and www.TradingEducation.com “have a wealth of knowledge and novel investment ideas.”  

One of his main suggestions for other traders is, “Start small and make your mistakes early, as we all do, but never quit. Trading is a lifelong learning endeavor.”