The Breakout & Retest Strategy
Trade with Confidence, Not Guesswork
Every trader dreams of catching a breakout move but many get faked out and stopped out before the real move even begins. The key? Patience. That’s where the Breakout & Retest Strategy comes in.
This strategy helps you wait for confirmation and catch high-quality entries after a breakout - not during the chaos. Combine it with volume and key levels, and you’ll start spotting trades that offer both momentum and stability.
Let’s break it down.
📈 What Is the Breakout & Retest Strategy?
The Breakout & Retest Strategy is based on a simple idea:
Wait for price to break through a key support or resistance level, then enter on the retest of that level.
This gives you:
A clear entry point
Defined risk
Confidence that the breakout is real, not a fakeout
It works best with:
Horizontal levels (support/resistance zones)
Trendline breaks
Consolidation ranges
🧭 How the Strategy Works
🔹 Setup:
Identify a key level that price has tested multiple times.
Wait for a clean breakout above resistance (or below support).
Watch for a retest of the broken level—price returns to test it from the other side.
Enter the trade on a confirmation candle (engulfing, pin bar, etc.).
Use volume to confirm the breakout and bounce.
✅ Entry Rules (Long Trade)
Identify strong resistance (e.g., previous highs or range top).
Wait for a breakout candle to close above the resistance.
Wait for price to pull back and retest the breakout level.
Look for a bullish signal (engulfing candle, pin bar, etc.) on the retest.
Enter after confirmation candle closes.
Stop-loss: Below the retest low.
Target: 2x risk or recent swing high / measured move target.
❌ Entry Rules (Short Trade)
Identify key support that has held multiple times.
Wait for a break below support with a solid candle close.
Wait for price to come back and retest that same level from below.
Look for a bearish candlestick (engulfing, doji, rejection wick).
Enter after confirmation.
Stop-loss: Above retest high.
Target: 2x risk or next support level.
📊 Real-World Trade Example: Netflix (NFLX)
NFLX was consolidating in a sideways range on the 4-hour chart.
Price breaks above resistance with strong bullish volume.
It pulls back two candles later and retests the breakout zone.
A bullish engulfing candle forms, and volume picks up again.
Long trade is entered; stop below the retest low.
✅ Result: Price rallies and hits the 2:1 target in less than a day.
💡 Why the Breakout & Retest Strategy Works
Avoids Fakeouts
By waiting for the retest, you avoid emotional breakout trades that often reverse.Provides Structure
You trade with a defined level and clear invalidation zone (your stop).Volume Confirms Strength
Watching for rising volume on the breakout and/or retest adds another layer of conviction.Works in All Markets
Forex, crypto, stocks—you’ll see this pattern over and over again.
⚠️ Things to Watch Out For
Don’t chase breakouts. Wait for the retest. Missed the move? There’s always another.
Avoid weak levels. Look for zones with at least 2–3 prior touches and visible reactions.
Volume matters. A breakout without volume is a red flag—it may be a trap.
Reminder: This is not financial advice. These are my trade ideas and you should do your own research before any trades!
As always, let me know if you have any questions!
All charts shared by me are from TrendSpider use this link HERE if you’d like to look into their charting software!
- KR
Disclaimer:
This is my personal analysis and is not to be taken as trading advice. I am not a professional nor am I licensed with anything associated with the Stockmarket. Trading involves risk and you WILL LOSE MONEY. Everyone has a different risk tolerance, portfolio size, and style of trading. It is important to trade within your comfort.