Written by Dhiresh Dabasia
This article will explore how to take entries when the markets have broken certain structures such as ranges or trending chart patterns.
What is BRC (Break-Retest-Continuation)?
BRC occurs when there is a break of support, resistance, or trendline. It tends to open up high probability setups for a trade and gives excellent opportunities for one to find some potentially brilliant trades with good risk to reward ratios.
Why is BRC a crucial trade criterion and how to use it?
Using Break-Retest-Continuation, optimal entry points can be found for good risk-reward ratios.
For example, one should wait for a break of support, resistance, or trendline to occur and then wait for a pullback to retest the broken structure at which point, look to enter a trade. Many wonder why they should wait for a retest and not enter a trade when the price breaks through.
Waiting for a retest eliminates the possibility of having a fake breakout (fakeout) as the price could break and go back to trading where it was before the break.
Personally, allows for the confirmation at the point of the retest It is crucial to look for candlestick patterns such as shooting stars, dojis, and marubozus. These candlesticks confirm whether we will have the continuation in the direction of the breakout or not.
Different ways to trade once BRC criteria are met
Enter at the point of retest, once one has occurred, with a stop just above, or below, the broken structure and a target at the next key level with at least a 1:2 risk/reward ratio.
Another method is to open a position right as the structure broke and the price went above the previous high or below the previous low. Open a low-risk position, such as 0.5% of the account, as it is uncertain whether this is a BRC or a fakeout. This option typically needs a wider stop, as well as another position if a retest occurs. It is recommended to use this type of position only after having a solid grasp of risk management; otherwise, option 1 remains the best course of action.
Next is a chart showing a BRC and how to wait for a retest before entering.
Here we have ETHUSD breaking, retesting a parallel ascending channel and we then got continuation to the downside.
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