Level Breakout in Trading: An Entry Strategy After the Retest

A level breakout happens when price finally passes through a zone it used to stumble on repeatedly. But entering at the moment of the breakout itself is risky: volatility there is high, and price often returns back. My logic is simpler. Wait for a retest of the broken level, see confirmation by volume and a pin-bar, and only then enter with a short stop.

Levels are always the market's maximum attention. Participants watch levels and open their trades against them, so it is exactly there that all the interesting things happen. A beginner sees price break resistance and immediately jumps into the market. And a couple of bars later price reverses and takes his stop. I use this system often myself, and I like it first of all for its simplicity and clear logic.

In this article we'll cover:

• at the moment of the breakout you do not enter the market: volatility is high, it is easy to get caught on a false move;
• a true breakout is confirmed by volume, a false one lacks it, and this is your main filter;
• the entry point is not on the breakout but on the retest: a pullback to the broken level plus a pin-bar gives a short stop;
• stop behind the extremum of the pullback, target at the next impulse level, ratio from 1:2 and better 1:3.

Further in order: what to even count as a level and a breakout, what the entry through volume, a pin-bar and a retest looks like, and where exactly to hide the stop-loss so the risk is small and the potential large.

What Is a Breakout of a Support or Resistance Level

Level breakout is the moment when price passes through a support or resistance zone that it could not overcome many times before. Support is the area where buyers used to appear and held price from below. Resistance is the opposite, a zone above where sellers became active. An important caveat from my practice right away: a level is never a thin line but a range. Price calmly pricks it, goes a little above or a little below, so I always draw not one line but a small zone.

Special attention I give to impulse levels. These are the places the market once left with a sharp strong move. Such impulses are created not by retail but by large capital, which is exactly why price is drawn to such levels so. I build them from the first deep correction and take them from the four-hour chart, and if there is one on the daily, then it is ideal. The higher the timeframe, the more reliable the follow-through. More on how to build support and resistance levels I covered separately. And here is the key moment because of which most lose on breakouts. The mere fact that price exited the level means nothing yet. It is profitable for large capital to first knock out others' stops with a false move, accumulate a position, and only then go for real. This mechanics of false pricks and liquidity scarcity I show in detail in the working with levels section of the free course. So one breakout is not enough, you need a filter.

How to Trade a Level Breakout: Volume, Pin-Bar and Retest

Here I have just three supports: volume, a pin-bar and a retest. Volume is the number of trades that passed in a bar, by it you see whether large capital is active. A pin-bar is a candle with a long tail and a small body, it shows that one of the sides ran out of steam and cannot push price further. A retest is the repeat approach of price to a level that was just broken.

The order of actions itself is simple, and I repeat it from video to video. First comes the breakout, preferably on high volume, which speaks of a large player's activity. Then we always wait for the retest, that is the pullback to the broken level. Breakout, retest, without this you never enter. Otherwise it happens that price simply flies back into the range, and you are left with a loss. On the retest itself I look for a pin-bar: it shows the weakness of the side that tried to return price. A pin-bar appeared on the pullback to the level, that means you can work in the breakout direction up to the next level. The logic of the entry point on a pullback is worth working out separately, it is universal. Volume here is not for beauty. A true breakout almost always goes with rising volume, but when price jumped past the level on sluggish, fading volume, that is the first bell that the move is false. So volume is my main filter against traps. Whoever wants to understand the difference deeper should read about false breakouts, and how to read the pros' activity is in my breakdown of volume on the futures market.

Where to Place the Stop-Loss When Trading a Level Breakout

Now the specifics on protection. The stop-loss I place behind the extremum of that very pullback, essentially behind the top or the bottom of the pin-bar, plus a small buffer for the spread. This way the stop comes out short, because if price went past the pin-bar the scenario no longer worked and there is no point sitting in the trade. The target I set at the next impulse level, that is where the move will logically reach.

From this follows the math of the trade. I take trades with a risk-to-reward ratio of at least 1:2, and ideally 1:3. If the stop is three times smaller than the potential target, I do not even deliberate long: the situation has formed, I open. But everything worse than 1:2 I skip, even if it seems price is about to go. And yes, this is not a grail, you will be wrong, but at such a ratio even frequent mistakes do not knock you out of profit. If you want to see all this on a live chart, how I place the stop and take on a breakout, watch my video on the pin-bar and volume for the entry, there this moment is broken down on a concrete example.

My Take: Breakout, Retest, Then Enter, Never Before

The mere fact that price left a level guarantees nothing; you enter on the retest, never on the breakout itself, and that is the rule I have traded by since I have been trading since 2013. The beginner jumps in at the breakout and price reverses to take his stop, while the patient version waits for the pullback, the pin-bar and the volume, and is rewarded with a short stop instead of a chase. This is not advice for you personally, it is how I act from my own practice: over the distance it is not a single trade but the quality of entries and risk control that wins. The honest limitation is that not every breakout gives a retest; some moves fly off and never look back, and those I miss entirely. But that is a price worth paying, because the trades I do take come with defined risk and a ratio that survives being wrong often, and that combination matters far more than catching every move.