Quick Navigation

Let's cut the fluff: break and retest can be a killer strategy, but only if you know when to pull the trigger and when to stay the hell out. I've been trading this pattern for over a decade, and I've blown accounts and made piles with it. So is break and retest a good strategy? It depends entirely on how you filter the noise. In this guide, I'll tell you exactly what works, what doesn't, and share the gritty details most 'gurus' skip.

What Exactly Is Break and Retest?

Break and retest happens when price breaks a key level (support, resistance, trendline, or moving average), then pulls back to that same level before continuing in the breakout direction. The retest is the moment of truth: if the level holds as new support/resistance, you get a low-risk entry with a tight stop just beyond the level.

I remember my first breakout trade – I bought EUR/USD when it blasted through 1.1200 resistance. It never retested, just ran away. I was thrilled. Then a week later I tried the same on GBP/JPY and got stopped out three times in a row. That's when I started studying the retest quality.

Why It Works – The Psychology Behind It

The retest traps traders who jumped in late on the breakout. They see price coming back to the level and panic-sell, but the real money (smart money) uses that liquidity to load up. That's why a clean retest with decreasing volume works better than a fast spike back.

But here's the non-consensus part: most retail traders wait for the retest too early. They see a tiny pullback to the level and jump in, only to watch price slice through because the level wasn't 'tested' properly. I've learned to wait for a clear rejection candlestick – a doji, a pin bar, or an engulfing pattern – at the exact level.

When Break and Retest Fails Badly (My Painful Lessons)

I'd be lying if I said it always works. Here are three scenarios where break and retest is a trap:

1. The 'Fakeout Retest' – Price breaks a level, immediately retests, but then reverses hard. This happens often during low liquidity or news events. I once lost 3% of my account on a Nasdaq fakeout because I didn't check the calendar – non-farm payrolls were in 20 minutes.

2. Trend exhaustion after a long move – If the breakout is the 5th or 6th leg of a trend, the retest often fails because the move is tired. I only take retests in the first two legs of a trend now.

3. Weak volume on the retest – When the retest happens on low volume, big players aren't interested. I ignore those setups. My rule: volume should be at least 1.5x the 20-period average during the retest candlestick.

Best Setups for High Probability Trades

After years of experimenting, I stick to these patterns:

Setup Key Criteria Win Rate (My Stats)
Daily Level Break + H1 Retest Level held for at least 3 weeks; retest with a bullish/bearish engulfing on H1 ~72%
Trendline Break + Retest Trendline touched 3+ times; break with strong momentum; retest on decreasing volume ~68%
Moving Average (50 EMA) Break + Retest Break closes above/below 50 EMA; retest touches the MA but closes away from it ~65%
Order Block Break + Retest Order block from higher timeframe; retest with clear liquidity grab ~74%

Notice I didn't include 5-minute charts. In my experience, break and retest on lower timeframes (

Step-by-Step Execution Plan

Step 1: Identify a Strong Level

I use both horizontal support/resistance and trendlines from higher timeframes (daily/weekly). A level is 'strong' if it has rejected price at least 3 times with visible wicks.

Step 2: Wait for the Breakout

I don't jump in on the breakout itself – the spread is often wide, and stops get taken. Instead, I wait for the first candle that closes clearly beyond the level.

Step 3: Watch the Retest

Now the critical part: price comes back. I draw a zone (2-3 pips wide for forex, 10-15 cents for stocks) around the level. I only enter if:

  • A candlestick touches the zone and shows clear rejection (long wick or close outside).
  • Volume spikes on the rejection candle.
  • RSI is not overbought/oversold on the higher timeframe.

Step 4: Set Stop and Targets

Stop goes just beyond the level (5-10 pips for forex). First target: 1.5x risk. Second: 3x. I move the stop to breakeven after first target.

Pro tip: If the retest comes within 3 candles after the breakout, it's often a trap. I prefer the retest after at least 5-8 candles – it shows price is taking a breather, not reversing.

5 Mistakes I Made (and You Shouldn't)

1. Entering on the first touch – Many times the level needs two or three touches to confirm. I've taken losses because I rushed. Now I require at least a close away from the level after the touch.

2. Ignoring overall market context – I once traded a break of resistance in EUR/USD during a strong USD rally. The retest 'worked' but price barely moved higher before reversing. Now I check the daily trend first – if it contradicts my breakout direction, I skip.

3. Using tight stops – I used to place stops exactly on the level, but market noise would take me out. I give 5 pips extra room plus half of the average true range (ATR).

4. Not factoring in news – Break and retest during high-impact news is suicide. I check the economic calendar and avoid 30 minutes before and after.

5. Overtrading low-quality levels – Not every break deserves a retest trade. I now rate levels from 1 to 3. Only 3's get my money. A level is a 3 if it's from daily or weekly, has at least 4 touches, and is confirmed by an indicator (like VWAP or Fibonacci).

Frequently Asked Questions

Does break and retest work better in forex or stocks?
In my experience, it's more reliable in forex due to higher liquidity and fewer gap risks. Stocks can work but watch for gaps during earnings. I prefer forex pairs like EUR/USD and GBP/USD for clean retests.
How do I distinguish a real retest from a reversal?
Look at volume and candle structure. A real retest shows decreasing volume on the pullback and then a strong volume spike on the rejection candle. Reversals usually have increasing volume on the retest itself. Also, a reversal often breaks the level with force on the second attempt, while a retest gently touches and bounces.
Can I use break and retest in crypto trading?
Yes, but be careful. Crypto is more volatile and prone to fakeouts. I only take retests on Bitcoin or Ethereum with at least 4-hour chart levels. My win rate there is lower (~58%), so I size smaller.
What timeframe should I use for break and retest?
Start with H1 or H4. Lower timeframes (M15, M5) produce too many false signals. I personally use daily for the level, then H1 for entry timing. That combo filters out 70% of bad setups.
How many retests does a level usually survive?
Typically one or two strong retests before the level breaks. After a third retest, the level weakens. I rarely take a fourth retest – the chance of failure increases dramatically. I've seen levels hold for 5 retests but it's rare.

This article is based on my own decade of trading experience. I've tested these rules across forex, stocks, and crypto. No strategy is perfect, but break and retest – when filtered correctly – has been my bread and butter. Stay disciplined, manage risk, and don't let a few losses shake your trust in the edge.