A Retest is when the price breaks out of a structure and then comes back up to touch it before continuing on its original breakout direction.
In the example above the price broke beneath a support zone, but then it came back up to test the zone as a resistance zone before dropping further.
When the price tested the newly made resistance zone, this is where our retest of the breakout was. When a breakout occurs, the best place to enter a breakout trade is at the retest of the structure which has just been broken.
The price does not always retest the structure after a breakout, we like to say - NO RETEST= NO TRADE..
Support & Resistance Zones are the base of technical analysis. Here's a couple of tips on how to draw them and use them in the correct way.
Firstly S/R ZONES are ZONES not lines. We see many charts with lines as their S/R zones, this limits the size of the supply and demand range, also limiting your trading area.
Secondly, a support and resistance zone needs to make at least 3 tests to make it valid. A structure with 3 or more tests confirms it is actually there. Many new traders get trapped because they trade based on invalid zones. We hope this helps you improve your S/R zone drawing and trading.
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