Breakout and retest: how to trade it with written rules

A breakout on its own is a coin you flip at the worst price. A breakout followed by a retest gives you something better: a second look at the level, a place for the stop and a trigger you can write down. This is how the setup is built on Gatilho's setup cards.

The idea in one sentence

Price breaks a level that held before, comes back to test it from the other side, and only when that test holds do you look for an entry. Old resistance acting as support (or the reverse) is the whole story.

The five rules of the card

Line	Written rule
Context	Higher timeframe (H4 or daily) moving in the direction of the break
Level	A swing high or low touched at least twice before the break
Break	A candle closes beyond the level; a wick through it does not count
Trigger	After the pullback, a candle closes back above the high of the retest candle (for a buy)
Invalidation	A close back inside the old range, beyond the retest low

Writing "a close, not a wick" removes most of the arguments you have with yourself in front of the chart.

Where the stop and target go

The stop goes a few pips beyond the low of the retest candle, because that is where the idea is proven wrong. The first target is a multiple of that distance (2R is a common teaching default), or the next obvious level if it comes first. Measure both in pips and run them through the risk-reward calculator before you look at size.

A worked example

EURUSD on H1, H4 trending up. The level is 1.0840, a high touched twice last week.

Step	Value
Break	H1 closes at 1.0862
Retest	Price dips to 1.0823, the candle closes at 1.0844
Trigger	Next candle closes at 1.0851, above the retest high of 1.0849: entry 1.0850
Stop	1.0820, under the retest low (30 pips)
Target	1.0910 (60 pips, 2R)
Size	$50 risk ÷ (30 pips × $10 per lot) = 0.16 lot, rounded down

Illustrative calculation, not an expectation of results.

Pip value depends on the pair and on your account currency, so check it in the pip value calculator and let the lot size calculator do the division. If your account is in BRL, the dollar result is converted at your broker's rate, which you should check rather than assume.

What makes the setup fail

• No retest at all. Strong breaks often never come back. Missing a trade is part of the rules, not a reason to chase.
• A retest that closes inside the range. That is the start of a false breakout, not a retest.
• A level nobody respected. One touch is not a level.

Next step

Copy the five lines into your own card using the setup rules template, then test it on past charts with the manual backtest method before any real money is involved. Trading involves risk, and most retail traders lose money; a written setup makes your decisions consistent, it does not make the market predictable.