Support and resistance not only acts as levels for possible entries but also levels for possible exits.
NZDCAD Monthly Time Frame
As you can see price has reached a very
key monthly level that has acted as both support and resistance and many
traders could have gone long here if it suits the entry criteria. We do
not use the monthly for an entry but we use it to identify where the
key dynamic levels are as guidance for our overall analysis. We then go
to the weekly for further insight.
NZDCAD Weekly Time Frame
As you can see price bounced from the key level of monthly support and has reached the next level of key resistance.
Now we are not saying that price cannot
easily blow right through this level of key resistance as once price
starts moving with momentum it can easily continue on and on but as
traders, we always want probability on our side meaning choosing not
only high quality trade "entries" and "entry levels", but also trade
management meaning good "exits & profit targets". Your trade
management is just as if not more important than your trade entry.
Now there are many ways to capitalize on
bigger moves, such as moving your stop loss to break even once price
reaches your profit target incase price comes back, or you can always
wait for price to break through the level that is in the way and look
for a re-entry.
