When to take profits. Hey, everyone. I hope you enjoy this content. Don’t forget to click that subscribe button and hit that bell to be notified of upcoming videos. Hey, everyone. Josh Martinez here with tradersagency.com and welcome to this week’s idea. Today’s date is June the 1st, 2021 and this is a followup through last week to discuss the E-mini Russell. So the E-mini Russell, otherwise known as the RTY. Remember with one E-mini contract, every tick’s worth about $5 with one micro E-mini contract, every tick’s worth about 50 cents. So last week or last this week’s idea, we discussed how there was about a thousand tick opportunity and we said that’s worth right around $5,000 with a full E-mini contract or $500 a micro. It appears the market has u-turned and rallied about 600 ticks thus far, which is great. So that’s about $3,000 with E-mini or $300 with micro, if you were willing to take on the risk. So there’s about 400 ticks remaining. So from here, from where we are now to the top level, this just comes the follow through.
In this week’s idea, I want to talk about taking profits. So when to take profits, when do we need to start locking in? Because sometimes the market will u-turn right above, it’ll go through the top of resistance. Sometimes the market will u-turn right underneath it and sometimes the market will u-turn right on it. And how my brain works is the closer we get to the top blue level, where historically the market being as a u-turn, bearish, I tend to get very conservative where I start taking money off the table. And sometimes I’ll close before the market even touches the top level. Why do I do that? I do that because there’s risk versus reward. Let’s just say hypothetically, you’re up 600 ticks. If you’re up 600 tick already because you bought in last week, then what you’re really saying is you’re risking 600 ticks in a open position to go after another 400 ticks of opportunity because you’re trying to get the thousand ticks total.
But you have 600 ticks and the question is, are you going to risk 600 ticks to go after 400 ticks?
And that’s kind of where the closer you get to your profits, you’re going to need to start thinking about, am I willing to risk my open profit opportunity to squeeze out the last remaining? And how do I do that is when or if the market gets close to resistance with the top level, which is the channel, if I see signs of hesitation, consolidation, if I see a reversal pattern, if I see trend lines breaking off the smaller timeframes, if I go to the one hour timeframe and I see this most recent up trend line and it’s broken, it breaks and enters into the sales line before we touch the top of resistance, I’ll say, hey, let’s just go ahead and cut it. There was a thousand ticks to be had here, I made 600 or I made 700, or I made 800. I think that’s kind of good.
So, I’m not sitting here saying you need to close your trade. I’m not sitting here saying the market’s not going to go up. What I’m just simply saying is hey, look, the one hour timeframe is inside of an uptrend simply because the daily’s pushing towards resistance. The closer we get towards resistance, people tend to take advantage of the pattern because patterns tend to repeat themselves. So the closer we get to that blue line, more profit taking is going to take place and if a buyer closes a buy position, it creates a sell order and that could begin to drop the market down.
So, again, this week’s idea is to sit here to say, if you have and you’re up a few hundred ticks, you’re up hundreds of ticks and there’s a threat of a retracement or a pullback, then by all means, start thinking to either protect yourself, lock in some profit, or be quick to remove the profit off the table because what you don’t want to do is you don’t want to be up 600 ticks, 700 ticks, 800 ticks and say I’m up 800 ticks and I try to make that last 10. And that last 10 costs such a draw down that you only walked away with a tiny bit of what you could have had.
So that’s just more food for thought for this week’s idea. The pattern is the pattern, support, resistance, support, resistance, support, resistance, support, resistance. Once we get the market touch the top resistance, then we’re done buying the Russell until the market either A, breaks out of the channel or B, falls back down. This is Joshua Martinez.
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