The break and retest strategy is a highly effective price action method where traders wait for price to break through a key level and then retest it as support or resistance before entering a trade. This strategy offers high-probability setups by ensuring that a breakout is genuine and supported by real market interest.

Break and retest strategy techniques allow traders to catch powerful trend continuations or reversals with excellent timing, tight risk control, and high reward potential.

What is a Break and Retest Strategy?

A break and retest occurs when:

• Price breaks through a major support or resistance level.
• Price retests that same level from the opposite side.
• Price respects the level and continues in the breakout direction.

The retest offers a second chance to enter a breakout with confirmation, rather than chasing the initial move.

In short, break and retest gives the market time to prove the breakout is real before you commit.

How to Trade the Break and Retest Strategy

Step 1: Identify Key Levels
Use the daily, 4-hour, or 1-hour charts to spot:

• Major support and resistance zones.
• Trendlines or channels.
• Psychological levels like round numbers.

Step 2: Wait for a Clean Break

• Look for a strong candlestick close beyond the key level.
• Avoid trading weak, uncertain breaks (long wicks, small bodies).

Step 3: Watch for the Retest

• Price should return to the broken level.
• The old resistance becomes new support (for bullish setups).
• The old support becomes new resistance (for bearish setups).

Step 4: Confirm with Price Action
On the retest, look for:

• Pin bars (wick rejection).
• Engulfing candles.
• Inside bars showing compression before a move.

Step 5: Enter the Trade

• Enter after confirmation of rejection from the key level.
• Conservative traders can wait for a break of the pin bar or engulfing pattern.

Step 6: Set Stop Loss and Take Profit

• Stop loss: Below the new support (bullish) or above the new resistance (bearish).
• Take profit:
  • Next major key level.
  • Use a fixed risk-to-reward ratio like 1:2 or 1:3.

Advantages of the Break and Retest Strategy

1. High-Probability Entries
Retests confirm the breakout strength, reducing the chance of getting trapped in fakeouts.

2. Tight Risk Control
Small stop losses with big targets offer excellent risk-to-reward ratios.

3. Simple and Logical
Clean structure and clear signals make decision-making straightforward.

4. Works Across All Markets and Timeframes
Forex, stocks, commodities, and indices all respect break and retest patterns.

5. Reduces Emotional Trading
Waiting for a retest removes the fear of missing out (FOMO) on breakouts.

Challenges of Trading Break and Retest

Missed Trades
Sometimes the price breaks and runs without retesting.

False Breakouts
Fake breaks still happen, especially during low liquidity periods.

Retests May Be Deep or Shallow
Retests are not always perfect — flexibility is required.

Requires Patience
Waiting for a retest demands discipline and avoids premature entries.

Simple Example of a Break and Retest Trade

Element	Example Details
Key Level	1.1000 resistance on EUR/USD
Breakout	Strong bullish candle closes above 1.1000
Retest	Price returns to test 1.1000 as support
Price Action Signal	Bullish pin bar at 1.1000
Entry	Buy at 1.1010
Stop Loss	1.0975 (below retest)
Target	1.1100 (next resistance)
Risk-to-Reward Ratio	1:3

The trader confirms the breakout with a retest and price action signal for a safe, high-probability entry.

Best Practices for Trading Break and Retest

• Only Trade Strong Breakouts:
  Look for breaks with momentum, not weak candles.
• Use Price Action Confirmation:
  Wait for rejection candles (pin bars, engulfing patterns) on the retest.
• Focus on Major Key Levels:
  Higher timeframe levels lead to stronger retests.
• Stay Flexible with Retest Depth:
  Some retests touch exactly; others pull back slightly deeper.
• Plan Risk-to-Reward Carefully:
  Ensure your targets justify the risk taken.

Common Break and Retest Mistakes to Avoid

Mistake	How to Overcome
Chasing the breakout	Always wait for the retest before entering.
Ignoring weak breakouts	Only trade clean, strong breaks with conviction.
Setting stops too tight	Place stops safely beyond the retested level.
Trading minor levels	Focus on strong, significant key levels only.

Avoiding these mistakes improves your consistency and reduces losses.

Examples of Break and Retest Trading in Practice

• Gold 1-Hour Chart:
  Price breaks above $2,000 resistance, retests as support with bullish engulfing — strong rally follows.
• GBP/USD Daily Chart:
  Breaks down through 1.2700 support, retests it as new resistance, forms bearish pin bar — sharp sell-off ensues.

Both examples use break and retest setups to catch major moves with tight risk and high reward.

Conclusion

In trading, patience is often the key to better entries and more consistent results. The break and retest strategy lets you avoid chasing volatile breakouts by waiting for price to prove itself. Combined with price action confirmation and smart risk management, it offers one of the highest-probability trading frameworks available.

If you are ready to master break and retest trading, sharpen your price action skills, and build a reliable trading system, explore our Trading Courses and start turning clean price structures into consistent profits today.