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Daily Breakout Retestlet the break go, buy the return

Evidence: ModerateIntermediateSwing · Continuation

A daily level breaks. Most traders are in on the break. This one is not — it waits for price to come back to the level it just broke and hold it.

The trade-off is exact and worth stating: you miss every break that never comes back, and in exchange every trade you do take has a stop a fraction of the size. Over a sample, that is a different distribution rather than a better one, and which you prefer depends on whether you can sit through long stretches of not trading.

Everything on this page is measured in daily bars. A rule that says 'twenty bars' means twenty trading days — about a month — and a stop that survives that has to be wide enough to sit through a normal week.

Category
Swing · Continuation
Timeframe
D1 level · H4 for the retest trigger
Suitable pairs
Any liquid major · works best where daily levels are visible
Session
Level from the daily close · retest can trigger in any session
Indicators / tools
Nothing computed — a horizontal level and ATR(14) for the stop

Valid setup

SW-03 · DAILY BREAKOUT RETEST — VALID SETUP EURUSD · D1 · a twice-touched level breaks, price returns to it, and the retest holds LONG 1.0788 1.0838 1.0887 1.0936 1.0986 1.1035 1.1085 TP1 = 2R 1R — small, because the level is right there TP1 = 2R ENTRY = H4 close back above the level THE LEVEL — two touches before the break STOP = 0.8 × ATR(14) below the level 1 2 3 4 5 1.1020 1.0942 1.0920 1.0903 ① First touch — the level exists ② Second touch — now it is worth drawing ③ Daily CLOSE above it, not a wick ④ Price returns to the level and holds it ⑤ H4 closes back above — enter, stop just under ⑥ 2R first, then the measured move

Exact rules

Entry

  • The level: a daily swing high with at least two touches. Draw it at the bodies, not the wicks, and do not redraw it afterwards.
  • Break: a daily close above the level. Not a wick through it.
  • Retest: price returns to within 0.3 × ATR(14) of the level within the next ten days.
  • Trigger: an H4 close back above the level after that touch. Enter at that close. If price closes a full day below the level instead, the setup is dead.

Stop loss

  • 0.8 × ATR(14) below the level.
  • Tight — that is the entire reason for waiting. If the level does not hold, the premise was wrong and there is nothing to sit through.
  • Risk 0.5%–1%.

Take profit / exit

  • TP1 at 2R, half off. The tight stop makes multiples reachable here that a break-entry version could not claim.
  • TP2: the measured move — the height of the range that broke, projected from the level.
  • Out if price closes a full day back below the level at any point.

Build Daily Breakout Retest

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Daily Trend Pullbackbuy the dip inside a trend that already existsThree-Day Reversalthree closes the same way, then the turnNew 20-Day High Continuationthe oldest systematic trade there is

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.