The Failed Retest of a Price Level is an Excellent Forex Setup
Trading the failed retest of a price level can be an excellent entry signal. This Forex setup is a form of swing trading and has a high probability of success.
When price reaches an existing
support or resistance
level, it will either bounce off it or proceed through it (breakout). As the chart above shows, the price tested the support line 3 times, then reversed and took off for the moon!
Price will usually only test a resistance level up to 3 times before the trend reverses
It it unusual for a price to test a level more than 3 times before it will reverse the trend and take off in the opposite direction. This is especially true in Forex, where speculative accounts become frustrated with roadblocks and will often turn tail and drive prices in the opposite direction.
It is wise to employ the use of a confirming signal, such as the Stochastic oscillator shown above. This will help to gage the potential for the price move you are anticipating.
