Trade a Support-Turned-Resistance Retest With the Numbers

[Fairman]

Trade a Support-Turned-Resistance Retest With the Numbers

EUR/USD broke below support at 1.0950 two days ago. Price rallied back to 1.0948 this morning and printed a bearish rejection candle with a close at 1.0941. Next support is 1.0900.

Design the short. Entry at 1.0941 on the close, or on a sell stop at 1.0939 under the candle low. The stop goes above the zone and the rejection candle's high, with a buffer: assume the candle high was 1.0955, so 1.0962. Risk is about 21 pips from 1.0941.

Target 1.0900, 41 pips from entry. Ratio about 1.95. After a 1-pip spread, roughly 1.8.

Compare with an alternative stop just above the candle high at 1.0958, risk 17 pips, ratio 2.4, but a smaller margin if price probes the zone again.

Evaluate the evidence for the trade: the broken level, the retest, the rejection, and a clear target. Weigh against the risk: a failed break would send price above 1.0962, and the broken support would turn back into support, trapping the sellers.

Check the context. Is the daily trend down? Is a high-impact event due? Is the spread normal?

Then size with the usual formula. At 10,000 dollars and 1 percent, risk 100 dollars, 21 pips at 10 dollars is 210 dollars per lot, so 0.47 lots.

The setup is ordinary, and that is the point. It is rules applied to a situation, with numbers that can be checked.

Exercise: apply this framework to three retests in history, and note which succeeded.