A retest occurs after a price level (support or resistance) has been broken, and the price returns to "test" the broken level before continuing in the direction of the breakout. It serves as confirmation that the level has indeed been breached and signals a higher probability that the price will move in the same direction as the breakout. This method is a key subtype of the breakout strategy and offers traders safer entry points.

But how do you identify a proper retest, and what can you use to confirm it?

A retest occurs after a price level (support or resistance) has been broken, and the price returns to "test" the broken level before continuing in the direction of the breakout. It serves as confirmation that the level has indeed been breached and signals a higher probability that the price will move in the same direction as the breakout. This method is a key subtype of the breakout strategy and offers traders safer entry points.

But how do you identify a proper retest, and what can you use to confirm it?

Volume plays a crucial role in confirming retests. During the breakout, you should observe a noticeable spike in volume, indicating that strong buying or selling pressure is behind the move.

On the pullback (retest), the volume tends to decrease, suggesting a temporary correction.

Once the price touches the broken level again, the volume should slightly increase—but not exceed the initial breakout volume. This volume behavior is a clear signal of a valid retest.

Candlestick formations are equally important. When observing a breakout, you'll often see strong, elongated candles with little to no shadows, reflecting decisive market momentum.

On the pullback, candles tend to be smaller, often with shadows (or wicks) that suggest indecision. These shadows should point toward the broken level.

Once the retest is complete, look for another strong candle to confirm the continuation of the breakout.

Let’s say you’re trading BTC/USDT on the M15 chart, and the price breaks above a key resistance level at $30,000. On the breakout, you see a significant increase in volume and long bullish candles without shadows. You don’t enter right away—instead, you wait for the pullback.

The price comes back down to $30,000, but the candles are much smaller with shadows pointing downward, and the volume has decreased. Now, you check the M60 chart and notice that the candle has closed above $30,000.

At this point, you have the green light. You place your trade at the retest level, and soon after, the price begins its next upward leg, continuing the breakout.

Retests offer traders an opportunity to enter the market with greater confidence, knowing that the breakout has been confirmed. Instead of jumping into trades on the initial breakout, which can often result in false signals, the retest allows you to wait for the market to validate the move.

By combining volume analysis, candlestick patterns, and higher timeframe confirmation, you can significantly reduce the risk of false breakouts.

Incorporating retests into your trading strategy can make a world of difference, especially in volatile markets like crypto. By mastering this method, you’ll be able to capitalize on high-probability setups while minimizing risk.

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