Everybody understands a need of a Stop associated with any market entry. There are several basic type of Stop level calculations and it's not a purpose of this short article to discuss them, so let's just say that we know what our Stop level is when we enter the market. But what to do next?

There not much you can do with your Stop. First, you can just let it be on the original level and do its job - protect you from the move against you. Many traders also use Trailing Stop - it moves if the price goes to your favor and does not move when the price is going against you. Trailing Stop is great on the trending market, but if you get caught by side movements, the Trailing Stop will just move right below (or above) your entry level and, when the eminent sudden move occur, will close your position with small profit or even with a loss. 

Other traders use so-called Break-Even Stop. How it works? It's simple. First, you place a stop at the original calculated level and wait until the profit of your position will reach some pre-detrmined level - that's when you move your stop to the price on which you entered the market (plus spread, of course). In this case, even if the price will go the opposite way, you won't loose a penny, because the Stop will close your position at the zero level. There is an addition to that tactics - some traders not only move a Stop to the zero profit level, but also close half of the position at that moment, securing some profit on the way.

I have tried all kind of Stops on my systems and found out what I call a Jumping Stop. It is a combination of Break-Even Stop and Trailing Stop (with some additions). It works on the positions with with the sizes greater than 1 lots. If your position is 1 lot, then just use Break-Even Stop.

At the entry time we place a Stop on some pre-calculated level (let's call it Original Stop Level). We also define the Minimum Profit Required (MPR) value which will be our triggering point. 

We also define a Step value which will be a size of one Stop Jump. For the simplicity of this example, let's say that our MPR will be 25 pips and the Step will be 5 pips.

Now, if the price will go against us, the original Stop will just close our position with a loss on which we agreed when decided to enter the market.

But, if the price goes to our favor and the profit (per one lot) reaches MPR, then we do two things:

1. We move the Stop to the Break-Even point plus one Step. This will secure us some small profit and it has a sense - why waste all life time of the position to go flat after all?

2. We close one lot at the MPR level (not half of the position like with the original Break-Even Stop!).

Now we continue to watch the position and, if the price moves in our favor for more than Step value, we close another lot (if the size of the position is still greater than 1 lot which is untouchable) and move our Stop one Step to the same direction - we secure more profits now!

So until our position is gaining profit, we move the Stop (but not on every pip movement of the price like Trailing Stop does) and closing the position lot by lot - jump after jump. The last lot will be closed by the opposite price movement (gaining much more profit now), when the trend will go against our position.

I worked with Jumping Stops manually and should say - it's a lot of work and it's very easy to make a costly mistake, as you should continuously re-calculate the stop and profit levels very fast, and often on a fast market movements. And if you have more than one position on a market, it's even harder. But if you do everything right, the Jumping Stop will earn you a lot of pips and money.

Anyway, after I made this technique work well for mer, it was just a logical thing to do to program this simple algorithm into my automated trading systems. Let the machine do the boring calculations and move your stops for you! 

The V2Bot system available on this Web site uses Jumping Stop to handle the open positions.