How To Use Jump Stops

If you are not familiar with Jump Stops it's a shame, because they are a great way to lock in profits on your trades without having to manually adjust stops all the time which is not only a pain in the butt, it's a waste of time if you can have it done automatically 24/7.

How To Automatically Trail Your Stops


While there are many automated ways to adjust your trailing stops to incrementally reduce your risk, or once the trade becomes profitable, they can keep locking in profits, during the trade. I'm going to focus on one of my favorite methods, Jump Stops.


Unfortunately, most software applications do not have the Jump Stop feature which I find odd, to say the least. They are so helpful when you want to move your trailing stop to reduce your risk on the trade. The way I use them, most often, is to wait until a certain profit target is hit and then have my stop "jump" up to just below my target and lock in a lot of profit.


Let's take a look at the chart below to start. The software I'm using is Track-n-Trade by Gecko Software. It's the only software I've used for the past 20+ years. You can get a free 14-day trial without having to use a credit card at this link: TNT I'm an affiliate with them and if you purchase the software I get a few dollars which helps keep this blog going. let's look at the chart below to start. The software I'm using is Track-n-Trade by Gecko Software. It's the only software I've used for the past 20+ years. You can get a free 14-day trial without having to use a credit card at this link: TNT


Let's Review The Chart

1. Long one at 68.75. Initial stop at 66.48. Limit order to take "long term" profits at 80.00. The initial risk is $4,860 (a much bigger stop than I normally take) and the reward is $11,250.00. The limit order is a very long way away so I want to automatically move my stop up if the market hits a certain price. I put this stop there just as an example for this lesson.


2. As you can see the next resistance is at 73.45 which is the next major resistance area. So if the price hits this resistance area there is a good chance that it might come back down. That's 470 points or $4,700.00 and I want to lock in some profits at that point.


3. I placed a Jump Stop at 470 + 400. What happens if the price moves up 470 points my stop will automatically jump up 400 points which would lock in $4,000.00 in profits and I did not have to do anything. You can see how I set the order up below.

4. You can see the Jump Stop is set to "If the market moves" 470 tics then move my stop up 400 tics which then locks in 400 tics or $4,000.00. And the best part is that I set all this up in advance and did not have to manually move my stop at all. Pretty cool!


The Next Step


What's the next step? Well, I would want to keep locking in profits if the price continues up. There are several ways I could do that. I could place another Jump Stop. The second profit target on the chart would be a good place to do that but I want to show you another way you could automatically keep moving your stop up and lock in more profits.


In this example I'm going to use a dollar trailing stop. If the market moves up another 100 tics or $1,000.00, I want my stop to trail $1,000 behind the market. So no matter how high the market goes my stop will always be $1,000.00 behind the current price. It will move up, never down, so the worst that happens is that you get stopped out with more profits. The Trailing Dollar stop can only go up; it can't move down. Look at the image below and you can see that I selected to trail my stop a present dollar amount.

I also want to point out that the Jump Stop MUST be hit before the trailing dollar stop is triggered. So If the Jump Stop is not hit, the original stop at 63.89 will remain and will not move up at all.


Of course, you could just start out with a dollar trailing stop and not put the Jump Stop in at all. Either way, you just put the order on and walk away, and let the trade develop on its own. After all, it's all set up to "manage" itself without you having to manually do anything else. The only thing you might want to do is to change the trailing stop to maybe $500.00 but that's a very tight stop for Crude Oil.