Retest
When price returns to a broken level to confirm it now holds from the other side.
Also called: re-test · backtest of a level
Written by Javier Sánchez Ros
In plain language
After a level breaks, price often comes back to it. Broken resistance is tested as support; broken support is tested as resistance.
A successful retest is confirmation that the break was genuine and that participants now treat the level differently.
It also offers a better entry than the breakout itself. The stop can sit just beyond the level, which is usually much closer than a stop placed after chasing.
Worked through
Buying the break at $29.65 or the retest at $29.50
- Breakout entry
- $29.65, stop $29.10
- Risk per share
- $0.55
- Retest entry
- $29.50, stop $29.25
- Risk per share
- $0.25
The retest entry is fifteen cents better and, more importantly, comes with a stop half the distance away — because once the old resistance has held as support, the level that invalidates the idea is much closer to the entry. Same risk budget, more than twice the position.
The logic behind the retest is that a level which flips roles has been tested by both sides. Buyers who missed the break get their entry, sellers who defended the level have given up, and the trade now has evidence rather than an assumption.
The cost is the trades that never come back. Strong breakouts frequently run without offering a retest, and a trader who requires one will miss exactly the moves that were most worth taking. That is a genuine expense, not a technicality.
A workable compromise is to take part of the position on the break and add on the retest if it appears. It gives up some of the efficiency in exchange for not missing the runs, which for most traders is the better trade.
Why it matters
Waiting for a retest trades some missed opportunities for tighter stops and clearer invalidation, which is a favorable exchange for most traders.
Common mistakes
- Waiting for a retest that never comes on the strongest moves.
- Treating any return to the level as a valid retest without watching how price behaves there.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
When price moves decisively beyond an established support or resistance level.
A price area where buying has repeatedly been strong enough to stop a decline.
A price area where selling has repeatedly been strong enough to stop an advance.
A move beyond a key level that quickly reverses back inside the prior range.
The price at which you open a position.