Retest

How a retest works

A retest has three parts, in order:

1. A level. Usually a swing high or low, or the edge of a range.
2. A break. A candle closes beyond the level. In the StraviFX glossary a wick alone doesn't count; the close does. A close above a swing high in an uptrend is a break of structure.
3. The return. Price comes back to the level from the new side. If candles keep closing on that new side, the retest has held. If one closes back through, it has failed.

The idea behind it is a change of roles: traders who missed the break may buy at the level they watched, and sellers who were defending it may be closing out. Whether that happens on any given chart is never certain, which is why the close, not the touch, decides.

A worked example

A trader with a $1,000 account risks 1% ($10) per trade. EUR/USD has topped at 1.0900 twice, then a 1-hour candle closes at 1.0915. The prices are an illustration, not real data. Both plans use the same stop, 1.0885 (15 pips under the level), and the same target, 1.0965.

• Chasing the break: buy at 1.0915. The stop is 30 pips away and the target 50 pips, a 1:1.67 reward-to-risk. At $10 a pip per standard lot, $10 of risk over 30 pips is 0.033 lots, rounded down to 0.03.
• Buying the retest: price dips to 1.0902 and the candle closes at 1.0905, still above the level. The trader buys at that close, 1.0905. The stop is 20 pips away and the target 60 pips, 1:3. The same $10 of risk now buys 0.05 lots.
• If the retest fails: a 1-hour close below 1.0900 means the break no longer counts. The retest buyer is out near the stop; a trader who was still waiting simply doesn't enter.

Check numbers like these with the lot size calculator and the risk reward calculator.

Why it matters

The broken level gives a retest a built-in invalidation point. The stop goes just beyond it, which is usually closer than a stop under the whole breakout move. A closer stop means a bigger position for the same money at risk, or the same position for less risk, and a better reward-to-risk to the same target.

Common mistakes

• Calling a retest before there was a break. If no candle closed beyond the level, price returning to it is just another test of the same level.
• Entering on the touch, before the close. A candle that touches the level can still close back through it. Waiting for the close is slower, and safer.
• Putting the stop right on the level. Retests often overshoot by a few pips. Leave room beyond the level and size the position for that distance.
• Expecting every break to come back. The strongest moves often don't. Decide in advance whether you trade the break, the retest or both.

Questions

Retests in the app

A StraviFX trade plan gives one entry, one stop and two targets. When the read describes a break, check whether the entry sits at the broken level or at today's price: they are two different plans with different stops. The read is analysis, not a signal to trade; the decision stays with you.

Related terms

• Market structure: The sequence of swing highs and lows a market prints: rising is bullish, falling is bearish, neither is a range.
• Break of Structure (BOS): A candle close beyond the last swing high or low in the direction of the trend. It signals continuation.
• Change of Character (CHoCH): The first break against the trend: an uptrend closing below its last higher low, or a downtrend above its last lower high.
• Market Structure Shift (MSS): The confirmed flip that can follow a CHoCH: a failed swing in the old direction, then a close beyond the next swing.
• Swing high / swing low: A candle whose high is above its neighbours, or whose low is below them. The pivots every structure reading is measured from.
• Higher highs / higher lows: The four swing labels (HH, HL, LH, LL) and what each combination says: uptrend, downtrend or range.
• Range / consolidation: Price moving between a ceiling and a floor with no new highs or lows beyond them. A reason to wait, or to trade the edges.
• Liquidity: Resting orders, mostly stop losses, that pool just beyond obvious highs, lows and round numbers. Price is often drawn toward them.
• Liquidity sweep / stop hunt: A push past an obvious high or low that triggers the stops there, then closes back inside. A close beyond is a breakout.
• Buy-side / sell-side liquidity: Buy orders resting above price (BSL) and sell orders resting below it (SSL). The pools a move is likely to travel toward.
• Equal highs / equal lows: Two or more highs or lows at nearly the same price. A flat edge that collects stops, so a common sweep target.
• Order block (OB): The last opposing candle before a strong move away. A zone price may return to, with the stop just beyond it.
• Fair Value Gap (FVG): A three-candle gap where candle 1's high and candle 3's low don't overlap. Traded through fast, so often revisited.
• Breaker block: A failed order block that price closes through, then returns to from the other side, where it can act the opposite way.
• Mitigation block: A failed order block after a swing that fell short. Price breaks it, then returns from the other side as trapped traders exit.
• Supply / demand zone: The base a sharp move left from: demand below price, supply above. The first return to a fresh zone usually counts most.
• Premium / discount: A range split at its 50% midpoint, equilibrium. Buy in the discount half, sell in the premium half.
• Optimal Trade Entry (OTE): The 62–79% pullback of the last impulse leg. A deep entry that keeps the stop close and the target far.
• Entry: The price a trade opens at: market, limit or stop. With the stop and target fixed, it sets the risk and the reward.
• Stop loss: An order that closes the trade at a set price to cap the loss. It goes where the idea is proven wrong, plus a buffer.

See every term in the trading glossary.