What a break is
A level holds because enough people are willing to sell there. A break means those people ran out, or gave up, or were on the wrong side. The evidence is a close beyond the level rather than a wick through it: a wick means price went there and was rejected, which is the level holding, not breaking.
Why the old level flips
Above the level, the sellers who were defending it are now losing money and want out at their entry — which means buying. The buyers who missed the break want in and would rather not chase — which also means buying at the level. Both groups have orders in the same place, and that is the whole mechanism behind old resistance becoming support. It is not magic and it is not always strong, but it is a real reason.
Two trades, not one
Entering on the break means a better chance of catching the move and a worse entry, with the stop back behind the level and therefore wide. Entering on the retest means a tighter stop just under the level and a far better reward-to-risk ratio, and it means missing every break that never comes back. Pick which of those two problems you would rather have, and then stop switching between them mid-trade.
What makes a retest worth taking
A retest that arrives slowly, on small candles, and holds the level with a rejection is a different picture from one that arrives immediately on a large candle and slices straight through. The first is people taking profit; the second is the break being undone. If price closes back inside the old range, the break failed and the trade is off — that is not a retest, that is a fakeout.
The honest cost
Somewhere around half of clean breakouts never give a retest at all, and the ones that do sometimes give it after the move is over. The retest trader watches good moves leave without them, permanently. That is the price paid for the tighter stop, and it is a fair price, but nobody should pay it without knowing they are paying it.
In short
| Break confirmed by | A close beyond the level, not a wick |
|---|---|
| Old resistance becomes | Support, and the reverse |
| Break entry | Better fill rate, wider stop |
| Retest entry | Tighter stop, many missed moves |
| Trade is off if | Price closes back inside the old range |
Common questions
How far past the level counts as a break?
There is no number that works everywhere, which is why the test is a close beyond the level on the timeframe you trade rather than a distance. On a fast pair a few pips means nothing; on a slow one it can be the whole move.
Does every breakout retest?
No. A large share never come back, and that is the known cost of only trading retests. If missing them is intolerable, take part of the position on the break and add on the retest if it comes.
What if the retest breaks the level again?
Then it was not a retest. Price closing back inside the range means the break failed, and the correct response is to be out, not to widen the stop and wait.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.