I am not the inventor of this strategy. It is widely available on the internet, and I have no idea who was the originator. Anyway, this is an exit strategy using 5-min chart. The basic idea is to use smaller time frame to manage a position, and using support resistance to define a better exit.

Rules:

• When previous resistance becomes support, it is time to consider exiting a SHORT position.
• When previous support becomes resistance, it is time to consider exiting a LONG position

Yesterday’s EURUSD trade was a good example to illustrate this strategy. Assuming we entered a short position at 1.27, and the market started to sell off, we decided not to set a hard profit target, instead we follow the price action to decide when to exit. Looking at the chart below, without a planned strategy , where would you exit? chicken out when there were small price bounces?

Here is the idea.  In a downtrend, price will form lower highs and lower lows. And previous support acts as resistance.  By following this principle, we let the profit run until the previous resistance level was violated and becoming a new support level.  This signals a potential trend change.

Again, no strategy is perfect, we might still miss out some even bigger profit.  However, in my personal opinion, it is good enough to manage short term position. Have a look at this method.

From the desk of Tradergav.com