Price Action
Breakout
Price closing outside a range or level. The reliable version comes back to retest the broken level and holds; the first push through is often false.
Also called: break out, retest
In practice
EUR/USD closes above 1.1100 resistance, the old ceiling. Rather than chasing, a trader waits for price to pull back and retest 1.1100 from above, now acting as support. When it holds and bounces, they enter long with a stop below the retest — a higher-probability breakout trade.
Why it matters for traders
Breakouts offer the largest, fastest moves but are also the most faked pattern, so patience is what separates profit from pain. Waiting for the retest turns a coin-flip chase into a risk-defined entry with a clear level beneath you, which is why most professional breakout traders wait for confirmation rather than gambling on the first candle through.
Common pitfall
The classic pitfall is chasing the first candle through a level, which is the most-faked setup in trading. Many breakouts immediately retrace and become traps. The patient approach — waiting for the retest of the broken level — sacrifices a little entry price for a far higher hit rate and a clear stop location. If you must trade the initial break, do so with reduced size and a tight stop, since the retest may never come.
Related terms
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