is there a way (like candlestick pattern or sequence) to know if a certain level will probably be retested or not?
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Hi, it’s depend on your strategy, sometimes is better wait sometimes not, you should test strategy, in this two conditions and make conclusions. Regards Greg
I am trading using trend lines breakout, and I noticed that sometimes it just take off right after the breakout happens and other times it may come back to retest with a whole candle or a wick before it continue on its way.
So I was wondering if may be with candlestick pattern or may be something else we can tell the probability if the breakout area will be retested or not
There is no way to be 100% certain a breakout will occur or not - nobody knows the future.
Whether to take the trade or wait for more information is an eternal question in trading - taking the trade at the earliest opportunity means you capture the maximum possible price movement and you might be entering relatively close to your TA-based stop-loss level.
But entering early also means you will take many false breakouts, and a close SL means you might be stopped frequently when price became unexpectedly volatile, but then continued in your selected direction.
Waiting for confirmatory information means you miss some of the best gains and sometimes miss the trade completely if price goes very quickly in your direction. But you should suffer less losers from false breakouts and volatility-hit stops.
There is not a right choice - much depends on the character of the trader - are you happier with a few big wins and many small losses, or with a better win rate with smaller wins.
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I can say with my experience that the bigger the breakout, the increased probability of a retest. What pair are you looking at? I’m happy to offer my thoughts.
In honesty - IF we knew the answer to that question - we’d all be rich !
You could try looking at support and resistance on the bigger timescales.
And the workings of the old masters Like Wyckoff certainly give food for thought since the patterns he speaks of seem to apply to Forex as well as to Stocks - false breakouts are forecast by his studies - but then again - so are “Real ones”
If you do a search on Wyckoff you’ll find several threads here, including this one ;
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and of course - this one ;
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Define “breakout”. Breakout from what? A chart pattern such as a triangle, or a channel, or a range? Can you post some charts so that we can understand what you’re looking at?
I don’t see breakouts. I see continuation patterns or reversal patterns. Consult the higher timeframe market structure to determine the probability of price continuing along a trend or reversing. Look left. Always look left. 
Along with market structure, try and estimate where liquidity lies in the market for additional clues.
Keep your analysis simple. Don’t complicate it with chart or candlestick patterns. Once you’ve determined a high probability outcome take the trade or wait for a retest of the breach of a level. Try this on a demo account first to get some practice.
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To deal with it, you just have to carefully test the results, it’s the only way you know when it gives a real signal and when it’s false… Each indicator has certain features…
Nice post.
Breakout takes place when the price of the asset has penetrated a significant level of support or resistance. A breakout is considered successful when the price continues to move in the same direction. After the breakout happens, wait for the retest to take place. In retest, the price will move back towards the breakout level and then proceed in its original direction.
Don’t look for break-outs: look for trends.
The best way to analyze whether to wait for a retest is to assess the risk to reward ratio and ask yourself, “Is the risk worth the reward?” If it is then retest will be the appropriate course of action.
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I see for important demand and supply zones on any trend. like if there is growing wedge formation then trace the trend lines and look for the previous supports. Market never goes straight down or up, it will definitely retest and where the rebound occurs mark your stop loss.
You took the word right out of my mouth!
@tommor - I know you are an advocate of trend trading, but you may want to refrain from telling people what they should or should not do Trading breakouts is as good strategy as trend following, swing trading, scalping etc. Even if you are extremely profitable with trend trading - well, let traders have their own methods and ways.
We don’t know, if level will be retested. If you trade breaks, you count for momentum after break caused by lump of pending orders waiting on the other side. Retest is created by some part of traders who take profits quickly (creating supply) and then demand kicks in on the level.
Personally, I am a fan of aggressive entry on level break and fast risk reduction afterwards without waiting for retest. I found this more in line with my personal preferences - by no means I think this is best way, it is just comfortable for myself. The approach:
- I set pending order slightly below level with stop loss at previous strong support/resistance OR dicated by price formation. I use pending order, as I am not able to sit all day in front of chart and monitoring 20+ pairs on 1H / 4H. That’s why my initial stop loss is usually quite high.
- If pending order triggers, I move the SL right below candle which broke it. This decreases the SL from initial 2% to 0.2% - 0.3%, yet it increases the chance to hit the SL.
- At this stage there are few scenarios.
- Price goes 20-30 pips in my favor. I move SL to breakeven with 1-3 pips margin in plus. Jumping to free trade is priority.
- SL is hit below candle not reaching BE - I lose 0.3% and I am quite happy I have probably saved 1.7% risk Move back means, that momentum was not enough for this trade. Here price can either crawl along the level OR get back below. If price goes back from the level, I am happy with placing another pending order as long as whole randez vous with this level does not cost me the initial 2% I was ready to lose in the first place. This means that, as long as I am managing to get to trading platform and move SL to 0.3% I can retrade the same level 6-7 times (never had to).
- My BE+ is hit. It means, that price went for a retest. If it holds on previous level, I am good with manually jumping back on retest.
Using above method I feel I am achieving the good compromise between cost of bad trades (tight SL/ fast BE) and cost of lost opportunities (waiting for retest, which may never come).
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I like the technique of advancing the stop-loss after your order has been triggered. Managing risk is the key element in trading and this is a good way of achieving that.
Well, I know that professional traders have the ability to predict the price action near the support and resistance levels, but their trading strategies are too complicated for me to understand and implement on practice. I mean that in such cases they turn to fundamental analysis and they can see some of the insights there. I don’t really think that individual traders should care about such things. Surely, I do understand that the idea of knowing whether the price will retest or not is incredibly tempting, but I think that it is a wild goose chase. It is better to concentrate on the simplier ideas which can be used by all of the traders who have the power of the regular PC at their disposal. I do understand that professional traders who work on investing funds need to know that because of the fact that they can earn or lose quite a huge sum of money just because of the volumes that they trade. However, as for individual traders, there is not really much which we can lose if we fail to recognize the price action right after the trend breakout.