The breakout retest swing strategy is a refined trading method that focuses on entering after a breakout and a successful retest of the broken support or resistance level. Rather than jumping in immediately, traders wait for confirmation that the level holds, providing a safer and often more profitable swing trading opportunity.

In this article, we explain how the breakout retest swing strategy works and how to apply it effectively across different markets.

What is a Breakout Retest Swing?

A breakout retest swing occurs when:

• Price breaks through a major support or resistance level.
• After the breakout, price pulls back to the broken level (the retest).
• The level holds as new support (for breakouts above resistance) or new resistance (for breakouts below support).
• A new swing move follows in the direction of the original breakout.

This pattern provides a second chance to enter the market with better risk-to-reward and greater confirmation.

Why the Breakout Retest Swing Strategy Works

• Confirms Breakout Strength: A successful retest shows that the breakout level has flipped roles.
• Reduces False Breakout Risk: Many initial breakouts fail, but retests filter out weak moves.
• Offers Lower-Risk Entries: Stops can be placed tight, near the retested level.

How to Set Up a Breakout Retest Swing Trade

Here’s how to prepare:

1. Identify strong support and resistance levels on higher timeframes (e.g., 1-hour, 4-hour, daily).
2. Watch for a clean breakout with a strong candle and rising volume.
3. Wait for price to pull back to the broken level.
4. Use a Volume indicator and a Momentum indicator (e.g., RSI or MACD) to confirm strength during the retest.

How to Trade the Breakout Retest Swing Strategy

Here’s a structured approach:

1. Identify the Breakout

• Watch for price breaking decisively above resistance or below support.
• Look for strong breakout candles and increased volume.

Pro Tip: Clean breakouts are more likely to hold and provide strong retests.

2. Wait for the Retest

• After the breakout, price should pull back to the breakout level.
• The retest should be shallow and controlled, not a violent reversal.

3. Entry Strategy

• Buy Setup:
  • Enter long when price retests the broken resistance (now support) and forms a bullish reversal candle (e.g., bullish engulfing, hammer).
• Sell Setup:
  • Enter short when price retests the broken support (now resistance) and forms a bearish reversal candle (e.g., bearish engulfing, shooting star).

Volume should decline during the pullback and rise again when the bounce occurs.

4. Stop-loss Placement

• For long trades, place the stop-loss just below the retested support level.
• For short trades, place the stop-loss just above the retested resistance level.

Tight stops allow for higher reward-to-risk ratios.

5. Profit Target

• Target a swing move:
  • Aim for at least 2x or 3x your risk.
  • Alternatively, use recent swing highs/lows or Fibonacci extensions to set targets.

Trailing stops can be used to maximise gains if the move extends strongly.

6. Risk Management

• Risk only 0.5% to 1% of your trading capital per trade.
• Only trade clean, well-formed breakouts and retests.

Best Practices for Breakout Retest Swings

• Use Higher Timeframes for Context: Confirm the overall trend direction before entering.
• Look for Strong Breakouts: Weak or sloppy breakouts often fail retests.
• Wait for a Candle Close: Enter only after a strong reversal candle forms at the retest point.

Breakout Retest on Different Markets

• Forex: Works exceptionally well on EUR/USD, GBP/USD, USD/JPY, and gold.
• Stocks: Ideal after earnings breakouts or news-driven moves.
• Indices and Crypto: Bitcoin and major indices frequently respect breakout retests.

Common Mistakes to Avoid

• Entering Without Retest Confirmation: Always wait for a clear reversal signal.
• Chasing Breakouts: Patience is key; wait for the pullback.
• Ignoring Volume: Weak volume on the breakout reduces the success rate.

Advantages of the Breakout Retest Swing Strategy

• Safer Entries: Reduces the chance of getting caught in a false breakout.
• High Reward-to-Risk: Tight stops and bigger targets.
• Clear Structure: Easy to identify and trade.

Conclusion

The breakout retest swing strategy offers traders a more conservative and often more successful way to trade breakouts. By waiting for the retest, confirming the level holds, and entering with clear reversal signals, traders can consistently capture powerful swing moves with excellent reward potential.

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