Retest Question

Trading Discussion
1

I’m reading a book about a support & resistance strategy. Look at this picture:

[Album] Imgur

I don’t really get it how the retest works. When the first red candle get through the trend line it is followed by a candle with a very small body. After that there are 2 green candles which touches the trend line, after that is a red candle which says its not a entry point because the retest is not complete? But why it isn’t complete? And why the other red candle(the entry point) is? In the book I read: “The retest absolutely has to be bigger than 2 4h candles”. Do they mean 2 is too less and it has to be more? Like 3 or 4 candles? Can someone explain me the retest and this example please. I like images :wink:

2

Its not complete because price must reject the resistance level/trend line. The key to understanding this is understand not only S/R but also candle sticks. The smaller candle stick formations prior to the rejection/entry candle tell a whole story in themselves. An important one in this case.