Overview
Many breakouts fail. Waiting for the retest filters some of them and gives a defined stop on the other side of the level.
Objectives
- Avoid chasing breakout candles
- Use the broken level as the risk anchor
Suitable market conditions
- Clear level with several reactions
- Breakout with a full candle close
Tools and indicators
- Support and resistance
- Market structure
Market bias
Direction of the breakout, supported by the higher timeframe.
Entry rules
- Wait for a close beyond the level
- Wait for price to return to the level
- Enter on a rejection from it
Confirmation
- Rejection candle at the retest
- Lower-timeframe BOS in the breakout direction
Stop loss and take profit
- Stop on the other side of the level
- Target the next level
Risk management
- Fixed risk
- Skip if the retest is too deep
Valid example
Resistance breaks on H4 with a full close. Two candles later price retests it, prints a rejection and continues.
Invalid example
Price closes back below the broken resistance. The breakout failed.
Common mistakes
- Buying the breakout candle
- Placing the stop exactly at the level
Advantages
- Defined risk
- Filters some false breaks
Limitations
- Strong moves often never retest
- Retests can overshoot
No strategy guarantees profit or a particular win rate. Test any approach on a demo account and size every trade from a fixed risk.