The #1 Most Popular Strategy to Get Funded by Prop Firms

🎓 PASS THE PROP TIPS

📈 Master the Breakout Retest to Pass Your Prop Challenge

One of the most effective techniques to pass your prop trading challenge is the breakout retest strategy. This approach is used by many funded prop traders and is universally applicable across all trading instruments, from stocks and forex to futures and cryptocurrencies. The key to its success lies in understanding why the retest after a breakout is crucial and how to identify and confirm key levels.

Why the Retest is Important 🔍

When a price breaks out of a significant support or resistance level, it often retests that level before continuing in the breakout direction. This retest serves several purposes:

1. Validation of the Breakout ✅: A successful retest confirms that the breakout is genuine and not a false move.

2. Enhanced Risk Management 📉: Entering on the retest allows for tighter stop-loss placement just below the breakout level, minimizing potential losses.

3. Improved Entry Points 🎯: The retest often offers a better entry price than jumping in immediately at the breakout, leading to more favorable risk/reward ratios.

Identifying Key Levels with Support/Resistance and Fibonacci Retracement 🔢

To effectively use the breakout retest strategy, you need to identify significant support and resistance levels. These are price zones where the market has historically reversed or paused. Additionally, Fibonacci retracement levels can help pinpoint these key areas. By drawing Fibonacci levels from a recent high to a low (or vice versa), you can identify potential retracement zones, such as the 38.2%, 50%, and 61.8% levels, which often align with support and resistance areas.

Confirmation with Candlestick Patterns and RSI 🕯️📊

Once you’ve identified a potential breakout and subsequent retest area, use candlestick patterns to confirm the move. For an upside breakout, look for bullish patterns like an inside day or a hammer near the retest level. These patterns indicate a potential reversal or continuation of the upward movement.

Additionally, the Relative Strength Index (RSI) can provide further confirmation. Look for RSI convergence or divergence patterns:

• Convergence 🔄: When the price is making higher lows while the RSI is also making higher lows, it suggests strength in the current trend.

• Divergence ↔️: When the price is making higher highs, but the RSI is making lower highs, it signals a potential reversal, indicating the breakout might not hold.

Example Setup 🛠️

1. Identify Key Levels 📌: Mark significant support and resistance levels and use Fibonacci retracement to find confluence points.

2. Wait for Breakout 🚀: Monitor the price as it approaches and breaks out of the key level.

3. Observe the Retest 👀: Watch for the price to pull back and retest the breakout level.

4. Confirm with Candlesticks and RSI 🔍: Look for bullish candlestick patterns like a hammer or inside day at the retest level, and ensure RSI shows convergence.

5. Enter the Trade 💼: Place your trade with a tight stop-loss just below the breakout level for an upside move.

6. Manage the Trade ⚖️: Monitor the position, and use trailing stops to lock in profits as the price moves in your favor.

By mastering the breakout retest strategy, you can enhance your probability of passing your prop trading challenge. This methodical approach ensures you enter high-probability trades with excellent risk management, leading to consistent and profitable trading results. Happy trading! 📊💰.