The level
It has to be obvious, which means it stopped price at least twice and is visible on a chart four to six times higher than the one you are trading. A level nobody else can see has nobody else’s orders at it, and the whole method depends on other people’s orders being there.
The break
A candle closes beyond the level on your trading timeframe. A wick through it is a rejection, and rejections are the opposite of what you are waiting for. Better if the break happens during London or New York hours, because a break in the quiet hours has fewer participants behind it and gets undone more often when the real session arrives.
The entry
Price returns to the broken level and holds it: a candle that touches the level and closes back away from it. Enter on that close. If price instead closes back inside the old range, the break has failed and there is no trade — not a smaller trade, no trade.
Stop and target
The stop goes a little beyond the far side of the level, past the wick of the retest candle rather than exactly at it, so that the ordinary noise around a level does not take you out of a trade that is still correct. The first target is the nearest opposing level or structure. If that target is less than twice the distance to the stop, the trade is not worth taking — skipping it is a rule, not a judgement call.
What it costs, honestly
You will miss a great many breakouts that never return, and watching them run without you is the permanent, unavoidable cost of this method. In exchange you get a stop that is a fraction of the width you would need entering on the break, which is what makes the arithmetic work at a modest win rate. A method with a low win rate and large winners only survives if you actually take every signal, so decide before the week starts that you will.
In short
| Level | Two touches, visible on a higher timeframe |
|---|---|
| Break | A close beyond it, ideally in session |
| Entry | Retest candle closing back away from the level |
| Stop | Beyond the retest wick |
| Skip if | Target is under twice the stop distance |
Common questions
What if there is no retest?
There is no trade. That is the deal you accepted for the tight stop, and taking a late entry instead because you did not want to miss it is trading a different, worse strategy.
How long can I wait for the retest?
A handful of candles on your timeframe. Once the move has run a long way without coming back, the level is far behind and the stop it would give you is no longer tight, which removes the only reason to wait.
Does this work on all pairs?
It needs a pair that trends and has clean levels. On a pair that chops inside a tight range all day, every break is a fakeout and the method loses steadily.
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.