When it comes to trading in forex, retesting is a term that every trader should be familiar with. Retest, in forex, refers to the phenomenon where the price of a currency pair reaches a previous level of support or resistance, which was broken earlier, and then tests it again before continuing in its original direction. In simple terms, it means that a level that was previously broken is tested again by price action to confirm its strength or weakness.
Understanding Retest
Retest is an essential concept in forex trading as it helps traders to identify potential trading opportunities. It occurs when the price of an asset reaches a previous level of support or resistance, which was broken earlier. The market then tests this level again to see if it holds up as a new support or resistance level.
For instance, suppose the EUR/USD pair had a resistance level at 1.1500, which it broke through. In this case, the price might continue to rise and test the 1.1500 level again. If the price fails to break the resistance level, it will likely reverse its direction and move lower, indicating that 1.1500 is now a confirmed resistance level.
Retesting is a confirmation of a previous level of support or resistance in the market. It is an opportunity for traders to take advantage of potential trading opportunities. If the price is successful in breaking through a previous support or resistance level, traders can use this information to make trading decisions.
Retesting is a crucial tool in identifying potential trading opportunities in the forex market. It helps traders to identify levels of support and resistance and confirm their validity, which can be used to make informed trading decisions.
Retesting Strategies
Retesting strategies are used by traders to capitalize on potential trading opportunities. There are different retesting strategies used in forex trading, including:
1. Support and Resistance Retest Strategy
This strategy involves identifying levels of support and resistance on a chart and waiting for a retest of these levels. When the price reaches a level of support or resistance, traders look for confirmation of the level before making a trading decision.
2. Trendline Retest Strategy
This strategy involves drawing trendlines on a chart and waiting for the price to reach the trendline. When the price reaches the trendline, traders look for a confirmation of the trendline before making a trading decision.
3. Moving Average Retest Strategy
This strategy involves using moving averages to identify potential levels of support and resistance. When the price reaches a moving average, traders look for confirmation of the moving average before making a trading decision.
Conclusion
Retesting is a crucial concept in forex trading that every trader should understand. It helps traders to identify potential trading opportunities in the market and confirm levels of support and resistance. By using retesting strategies, traders can take advantage of potential trading opportunities and make informed trading decisions.
