Definition

The Second Entry Strategy is an advanced technique where traders avoid entering immediately at the breakout point, instead waiting for price to retest the broken zone. When the breakout occurs, the level changes its role: resistance becomes support (in an uptrend) or support becomes resistance (in a downtrend). Traders then wait for a reversal candle pattern at the retest to confirm the trade, avoiding stop-outs and improving win rate.

How to Identify

Clear breakout: The first candle breaks an important level with strong momentum, often a large candle or one with high volume.

Successful retest: Price returns to the breakout area and confirms the new role. If breaking up, price retests from above and bounces; if breaking down, price retests from below and gets rejected.

Confirmation candles: Look for reversal patterns like bullish engulfing, pin bar, hammer at the retest. These show that buyers/sellers regained control.

When you see a Bullish Engulfing candle at the retest support, the second green candle fully engulfs the prior candle's body, showing strong bullish reversal.

A Bullish Pin Bar has a long lower wick with a small body near the top, indicating rejection of lower prices and a turn upward.

How to Trade

Define a valid breakout zone within the market context (trend or range).

Wait for price to retest the breakout zone – do not enter at the initial break.

Observe the candles at the retest. Enter only after the reversal pattern closes.

Place a stop loss below the pattern's low (for a buy) or above its high (for a sell), or use a buffer like ATR.

Set a profit target at least equal to the breakout extension or the previous swing.

Real Example

Assume EUR/USD is in an uptrend. Price breaks above a previous high, creating a bullish Change of Character (CHoCH). Price then pulls back to the broken level – now support – and forms a bullish engulfing candle. A trader enters long after the candle closes, stop below the wick, target the expected high. This provides a good risk-reward ratio and higher probability than trading the initial breakout.

Common Mistakes

Ignoring the market context: retests in the middle of a range are less reliable.

Entering early before the confirmation candle closes.

Not having a stop loss plan, or placing stops too tight and getting stopped out prematurely.

Confusing a retest with a fakeout: always check price action and volume.

Content is for reference only, not investment advice. Forex trading carries high risk.

Second Entry Strategy: Retesting Breakouts with Candle Patterns

Definition

How to Identify

How to Trade

Real Example

Common Mistakes

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