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Breakout and Retest

Instead of chasing a breakout, wait for the price to come back and "retest" the broken level, then enter with a stop on the other side. Fewer trades, fewer fake-outs.

MarketsStocks, Forex, Crypto
StyleSwing trading
Timeframe1-hour to Daily chart
LevelIntermediate
Slav: "The price broke out and I missed it! Should I chase it?" Max: "No. Let it come back to you. Patience is cheaper than FOMO."

The idea

When price breaks through a strong resistance level, that old resistance often becomes new support. Many traders chase the breakout and buy at the top of a big candle. A calmer approach is to wait for the price to pull back to the broken level, check that it holds, and then enter.

When it works best

  • Clear, well-tested levels
  • Breakouts with strong momentum and above-average volume

When it fails

  • "Fake-outs": price breaks the level, then falls back below it
  • Very strong breakouts that never come back (you miss the trade, which costs nothing)

Entry rules (long example)

  1. Identify a resistance level tested at least twice.
  2. Wait for a candle to close clearly above it, ideally with higher volume.
  3. Do not chase. Wait for price to come back near the broken level.
  4. Enter when a candle shows buyers defending the level (for example a bullish candle closing above it).

Stop loss

Below the retest low, or back below the broken level. If price closes back under the level, the breakout idea is wrong.

Exit / take profit

At the next resistance, or use a measured move: the height of the previous range added to the breakout level.

Example (fictional)

Sunny Bikes has hit $25 three times and failed. One day it closes at $26 on high volume. Slav doesn't chase. Three days later it dips to $25.20 and closes at $25.70. He buys at $25.70, stop at $24.70 ($1 risk). The previous range was $21 to $25 ($4 tall), so his target is $29. Price reaches $28.90 two weeks later and he exits.

Pros

  • Better entry price than chasing
  • Clear point where the idea is wrong
  • Filters out some fake breakouts

Cons

  • Many strong moves never retest, so you miss them
  • Requires patience and screen time to watch the retest
  • Retests can turn into fake-outs too

Common mistakes

  • Entering before the breakout candle closes
  • Chasing because of FOMO after missing the retest
  • Ignoring the overall trend

Checklist before the trade

  • The breakout candle closed above the level
  • Price came back to the level and held
  • Stop is below the retest low
  • Target gives at least 2× the risk
Educational example, not a recommendation. Test any strategy on a demo account first, use the position size calculator, and record every trade in your journal.
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