Trading in the cryptocurrency market can be highly profitable, but it requires a solid understanding of technical analysis. One of the most effective yet often overlooked techniques is the “retest” trading strategy. This method helps traders identify high-probability entry points, reduce risk, and improve their overall win rate.
In this article, we’ll dive deep into:
✅ What a retest is in trading.
✅ Why the retest strategy works so well.
✅ How to identify and trade successful retests.
✅ Common mistakes and how to avoid them.
By mastering this technique, you can increase your accuracy and make more consistent profits in the crypto market.
What is the Retest Trading Strategy?
A retest occurs when the price breaks a key level (support or resistance) and then returns to test that level again before continuing in the breakout direction. This creates an opportunity for traders to enter at a better price with more confirmation.
Types of Retests:
🔹 Support to Resistance Flip (Bearish Retest):
- Price breaks below support.
- The previous support becomes new resistance.
- Price rejects at resistance → Sell opportunity.
🔹 Resistance to Support Flip (Bullish Retest):
- Price breaks above resistance.
- The previous resistance becomes new support.
- Price bounces at support → Buy opportunity.
Example:
Imagine Bitcoin is trading at $50,000 and has strong resistance at this level. If BTC breaks above $50,000 and moves to $51,500, it may later return to retest $50,000 as support. If it holds and bounces, this confirms the breakout → A strong buy signal!
Why Does the Retest Strategy Work?
The retest strategy is powerful because it confirms the strength of a breakout. Many traders get caught in fake breakouts (false breakouts) where the price breaks a level but then reverses. The retest helps filter out these traps.
Key Reasons the Retest is Effective:
✅ Confirmation of Breakout: A successful retest validates the breakout level.
✅ Better Risk-Reward Ratio: Entering on a retest allows traders to place a tighter stop-loss, reducing risk.
✅ Institutional Footprint: Big traders (whales) often enter on retests, adding liquidity.
✅ Stronger Momentum: If the retest holds, price movement becomes more predictable.
How to Trade the Retest Strategy
Step 1: Identify Key Levels
- Look for strong support and resistance zones on higher timeframes (1H, 4H, Daily).
- Use trendlines, Fibonacci levels, and moving averages to confirm levels.
Step 2: Wait for the Breakout
- Price should break above resistance (for bullish retest) or below support (for bearish retest).
- Avoid trading impulsive breakouts—be patient!
Step 3: Wait for Price to Retest the Level
- After a breakout, price often returns to test the previous level.
- Look for candlestick confirmations like pin bars, engulfing candles, or bullish hammers.
Step 4: Enter the Trade
✅ For a bullish retest:
- Enter long when the price retests previous resistance (now support) and shows bullish rejection.
- Stop-loss: Below the new support.
- Take profit: Next key resistance level.
✅ For a bearish retest:
- Enter short when the price retests previous support (now resistance) and shows bearish rejection.
- Stop-loss: Above the new resistance.
- Take profit: Next key support level.
Step 5: Manage Risk & Take Profit
- Use a 2:1 risk-reward ratio (e.g., risking 2% to make 4%).
- Secure partial profits at first resistance/support and let the rest run.
Common Mistakes and How to Avoid Them
🚨 1. Entering Too Early
- Mistake: Many traders jump in before price confirms the retest.
- Solution: Wait for candlestick confirmation (wicks, engulfing patterns).
🚨 2. Ignoring Volume
- Mistake: Trading retests with low volume increases failure risk.
- Solution: Use volume indicators (e.g., OBV, Volume Profile) to confirm breakout strength.
🚨 3. Overlooking Fake Retests
- Mistake: Not all retests hold—some are liquidity grabs before reversal.
- Solution: Combine retests with RSI divergences, MACD confirmations, or trendlines.
🚨 4. Trading Against the Trend
- Mistake: Taking retests against the main trend lowers win probability.
- Solution: Always trade in the direction of the dominant trend.
🚨 5. Setting Stop-Loss Too Tight
- Mistake: If stops are too close to the retest level, minor wicks can hit them.
- Solution: Set stops slightly below support or above resistance to avoid stop hunts.
Real Market Example of Retest Trading (BTC/USD)
🔹 BTC had major resistance at $28,000 in March 2023.
🔹 It broke out and rallied to $29,500 but then pulled back.
🔹 Price retested $28,000 as support and bounced strongly.
🔹 A trader who entered at $28,000 with a stop-loss at $27,500 and a target at $30,000 would have made a solid risk-reward trade!
This example highlights how waiting for the retest instead of chasing the breakout gives traders a better entry and reduced risk.
Final Thoughts: Why You Should Use Retest Trading
The retest strategy is a powerful way to improve your trading win rate because it helps:
✔️ Avoid fake breakouts by confirming key levels.
✔️ Enter at better prices with lower risk.
✔️ Trade with confidence using price action confirmation.
Key Takeaways:
🎯 Always wait for a clean breakout and a retest before entering.
🎯 Use volume and candlestick patterns to confirm trades.
🎯 Manage risk properly—don’t set stop-losses too tight.
If applied correctly, the retest strategy can give you a significant edge in crypto trading. Patience and discipline are key to mastering this technique!