What is a break and retest strategy?

A break and retest strategy is a popular approach by traders and investors focusing on price action. It involves waiting for a breakout to happen and then being patient for it to retest the immediate resistance/support level. This article will look at what a breakout is and how you can use the break and retest strategy in forex.

What is a breakout retest?

A breakout retest refers to price breaking through a level of support or resistance, like in the above example, then price returning to the level that was previously broken. In a bullish breakout through resistance, the previous resistance now acts as support. In a bearish breakout through support, the previous support will act as resistance.

Is a break and retest a good forex trading strategy?

A break and retest is a good forex trading strategy that is also easy to use. It happens after the price forms a consolidation or a certain chart pattern. If you are new to the strategy, we recommend that you spend enough time practicing it in a demo account before you apply it in a real account.

Does the retest always come?

The retest may never come. The retest doesn’t always come, causing traders setting up the breakout and retest strategy to lose out on potentially major moves. The retracement is sometimes incomplete. There are also times when the retracement does not return to the level the price broke out from.