Break and Retest Strategy: Wait for the Level to Flip

Q: What is a break and retest strategy?

It is a breakout entry that waits. Price first closes through a support or resistance level, then drifts back to test that level from the other side, and the trade is taken only if the level holds as the new floor or ceiling. The entry comes on the candle that turns away from the level, and the stop goes just beyond it.

Q: How do you know a retest has held?

Look at closes, not wicks. During the pullback, price can poke back through the level on a wick, but candle bodies should keep closing on the breakout side. Once a candle turns away from the level in the breakout direction, the retest has held. A body that closes back through the level means it failed, and the setup is off.

Q: Where should the stop go on a break and retest trade?

Just beyond the level on the far side from your entry, with enough room to clear the retest wick. For a long after a break of resistance, that means below the old resistance line and below the low of the retest candle. If the distance is too wide for your normal risk unit, reduce the position size rather than moving the stop closer.

Q: What happens if price never retests the level?

You don’t trade it. Strong breakouts sometimes run without looking back, and a retest plan will miss those. That is the trade-off you accept for entries near the level instead of at the top of the breakout candle. Chasing the move after deciding to wait for a retest is the most common way the method gets broken.

Q: Is break and retest better than trading the breakout candle?

Neither is better in every market. Entering on the breakout close catches every move but puts the stop far away and fills you where fakeouts reverse. Waiting for the retest gives a tighter, clearer stop and filters some fakeouts, but it skips the breaks that never return. Test both on the pairs and timeframes you trade before choosing.

The breakout candle closes above resistance, you buy, and two bars later price is back under the line. Your stop was below the whole candle, so the loss is bigger than it looked when you clicked.

A break and retest strategy is the patient alternative. You let price close through the level, wait for it to come back, and enter only if the old ceiling now holds as a floor. By the end of this post you’ll have a four-step check you can run on your next breakout before you risk anything.

Key Findings

Three events, in order: a close through the level, a return to it, and closes that stay on the new side.
The level becomes the stop: a held retest lets you place risk right past the line instead of under the entire breakout bar.
You will miss the runaways: breaks that never pull back are the price of a better entry, and chasing them breaks the method.
A body back through the level ends the trade; a wick through it does not.

What is a break and retest strategy?

It is a breakout trade with a second confirmation. Price closes through support or resistance, returns to test that level from the other side, and you enter only when the level holds. Old resistance has to act as support, or old support as resistance, before any money goes in.

Traders call this role reversal. Robert Edwards and John Magee described it in Technical Analysis of Stock Trends (first published in 1948): a level that stopped price going up tends to slow it on the way back down, because the traders who sold there, or wished they had bought there, act at the same price again. Thomas Bulkowski, who catalogued chart patterns in his Encyclopedia of Chart Patterns and on his pattern research site, names the upward version a throwback and the downward one a pullback.

The old ceiling becomes the floor, and the stop goes under it.

Watch where the stop lands in that clip. It sits under the line that got retested, and that placement is the whole reason to wait.

Why does chasing the breakout candle cost you?

Because the breakout close is usually the worst price in the move so far. You buy the top of the biggest candle, and the only structural stop sits under that candle’s low, far away. If the break fails, you take a large loss. If it works, you spent a large risk for the same move.

The classic definition of a breakout is price moving outside a defined level. It says nothing about whether the move will stick. That gap is where fakeouts live, and the breakout candle is exactly where they reverse.

Same move, two entries. The retest shrinks the distance to the stop.

The red zones are the difference. On the left, the risk runs from the spike down to the breakout low. On the right, it only runs from the retest entry to a little under the level.

Where this costs youDeciding to wait for a retest, then buying anyway when price runs without you. That turns a patient plan into a late chase with no level underneath it.

What counts as a real retest?

A real retest has four parts, in order: a body closes past the level, price drifts back to it, candles keep closing on the new side, and a candle then turns away in the breakout direction. Miss any one and you have something else, usually a failed breakout or a plain range.

All four steps, or no trade.

Step three is the one people rush. A wick that pokes back through the level is normal; the market is probing for orders on the other side. A body that closes back through it is a different event. It says the level did not flip, and it cancels the setup.

What you see at the level	What it means	What to do
Wick through, body closes on the breakout side	Normal probe, level holding	Keep watching for the turn
Body closes back through the level	Flip failed	No trade; the breakout is suspect
Price stalls short of the level	Buyers stepped in early	Optional entry, stop still past the level
No pullback at all	Strong, one-way break	Let it go

Wick through, body closes on the breakout side

What it means: Normal probe, level holding
What to do: Keep watching for the turn

Body closes back through the level

What it means: Flip failed
What to do: No trade; the breakout is suspect

Price stalls short of the level

What it means: Buyers stepped in early
What to do: Optional entry, stop still past the level

No pullback at all

What it means: Strong, one-way break
What to do: Let it go

Where do the entry and stop go?

Enter when a candle turns away from the level after the retest, and put the stop beyond the level, past the retest wick. For a long after a resistance break, that means below the old resistance and below the lowest wick of the pullback. The level is the thesis, so the level is where you’re wrong.

If that distance is still wider than your normal risk, cut the size, not the stop. The position sizing routine handles the arithmetic: fix the loss first, then let the lot size fall out of the stop distance.

Quick testBefore you enter, point at the exact price that proves you wrong. If you cannot point at the level itself, you are not trading a retest.

Targets are simpler. The next opposing level is a natural first target, and a partial exit there keeps the rest of the trade honest. Measure the risk reward ratio between that level and your stop before you enter, not after.

What if price never comes back?

Then there is no trade, and that’s fine. Strong breaks driven by news or a session open often run without looking back. Waiting for the retest means you will miss some of the cleanest moves on the chart.

That is the deal you’re making. You give up the runaways in exchange for entries near a level you can define. In my experience the missed trades hurt more emotionally than the losses they would have saved you from, which is why so many traders abandon the method after a week. Write the rule down before the session: no retest, no entry.

How does break and retest compare with other breakout entries?

It sits between chasing the break and trading against it. Each approach wins in a different kind of market, so the choice is about which mistakes you’d rather make.

Approach	Entry	Where the stop sits	What it misses	Where it struggles
Buy the breakout close	On the break candle	Under the break candle	Nothing, it catches every move	Fakeouts that reverse right away
Break and retest	After the level holds	Past the level	Breaks that never pull back	Choppy markets that retest again and again
Trade against the failed break	After a close back inside	Beyond the failed high or low	Real breakouts	Trends that keep extending

Buy the breakout close

Entry: On the break candle
Where the stop sits: Under the break candle
What it misses: Nothing, it catches every move
Where it struggles: Fakeouts that reverse right away

Break and retest

Entry: After the level holds
Where the stop sits: Past the level
What it misses: Breaks that never pull back
Where it struggles: Choppy markets that retest again and again

Trade against the failed break

Entry: After a close back inside
Where the stop sits: Beyond the failed high or low
What it misses: Real breakouts
Where it struggles: Trends that keep extending

If you trade session opens, the opening range breakout uses the same logic on a range that forms in the first minutes, and a retest of the range edge is a common refinement. For the underlying skill of drawing the level itself, the support and resistance guide covers zones, widths and invalidation.

Can you trust the level you are retesting?

Only if it stays where it was drawn. A retest is a test of one specific price, so a level that shifts after the break makes every retest look perfect in hindsight. You end up measuring price against a line that moved to meet it.

This is easy to check. Screenshot the level before the break, then compare after the retest. If the tool redrew the line, your journal is recording setups that never existed live.

RelicusRoad Pro draws its levels once and leaves them in place on MT4, MT5 and TradingView, so the line you watched break is the same line price comes back to. It won’t decide whether the retest held. It gives you a fixed reference to decide against.

Frequently asked questions

What is a break and retest strategy? A breakout entry that waits. Price closes through a support or resistance level, drifts back to test it from the other side, and you trade only if the level holds as the new floor or ceiling. The entry comes on the candle that turns away, and the stop goes beyond the level.

How do you know a retest has held? Watch closes, not wicks. Price can poke back through the level on a wick, but bodies should keep closing on the breakout side. A candle turning away from the level in the breakout direction confirms the hold. A body closing back through the level means the flip failed.

Where should the stop go on a break and retest trade? Past the level on the far side from your entry, clear of the retest wick. For a long after a resistance break, that is below the old resistance and below the pullback low. If the distance is too wide, reduce size rather than tightening the stop.

What happens if price never retests the level? You don’t trade it. Some breaks run without looking back, and a retest plan misses them on purpose. Chasing after you decided to wait is the most common way the method gets broken.

Is break and retest better than trading the breakout candle? Neither wins everywhere. The breakout close catches every move but puts the stop far away and fills you where fakeouts turn. The retest gives a tighter, clearer stop but skips the breaks that never return. Test both on your own pairs and timeframes before picking one.

Next time a level breaks, run the four steps before you enter. If you want the level itself to stay put while you wait, see how RelicusRoad Pro draws and holds it.

Written for RelicusRoad by RelicusDigital.com.