So many retail traders are repeating the same old mistakes. Think about it, if 90% of retail traders lose money in forex trading and they’re all sourcing their information from the same place, then obviously the 10%’ers are doing something different, right? Below is a super simple yet high effective form of technical analysis, BCR Methodology (also known as break and retest forex) , that can be implemented to any trading strategy or trading system that will supercharge your trading performance. So let’s get stuck in!
Nowadays, most traders are stuck in a rut. For example, entering long positions at the high of the move before a pullback, entering short positions at the bottom of the move before a pullback, buying beneath resistance levels, selling above support, and choking their trades by having their stop losses too close to the entry-level.
Why do you think that is?
The answer is simple. Us humans tend to think that we know best. Overtrading? Hesitation? Outdated trading strategies? All traders are guilty of it, right?
Let me introduce you to a relatively simple piece of knowledge that if executed and implemented correctly, can boost your performance in the forex markets and reduced the risks involved in your trading. Significantly! Interested? Let’s dive into it…
What does BCR stand for?
In simple terms, BCR stands for:
Personally, I live by these three words when it comes to trading the Forex market.
The BCR Methodology isn’t by any means, a system or strategy in itself, but rather additional entry criteria that can be implemented to any and every strategy inside the Forex market, including a swing trading strategy. Further, it is an effective method when trading range markets as you can always draw a horizontal range line to find out if the price continues below or above the breakout target level.
What is Break and Retest Forex?
Simply put, a break and retest in forex is a trading strategy in which a currency pair makes a breakout above or below the trend line and then retests the support and resistance levels. Then, if a scenario of false breakout occurs in a trade, the currency pair will not move in the same direction. However, when retest occurs and the currency pair continues in the breakout direction, then there’s a strong indication for an entry point.
What is BCR’s Core Focus?
BCR is used to gain a better understanding of confirmation in your trade, whilst reinforcing principles such as patience and discipline. The key principles of being a consistently profitable trader. With this trading strategy, you are trading breakouts.
We are in a game of probabilities, and the more confirmation you have in a position, the higher the probability of the trade going in your direction. You want to see what it looks like on the chart, don’t you?
We – traders – just love the chart…
Let’s take a look.
In the example above, the first highlighted area on the left shows a breakout of the 50EMA (red line), the close above the 50EMA, and then price to come back down and retest it.
In this great example, the retest shows the market breaks beneath the 50EMA and therefore, we know the price is going to continue to the downside. However, on the example to the right of the chart, we see price yet again break the first broken level and closing above the 50EMA except for this time, the retest shows price rejecting the 50EMA so we know the price will continue going up.
In other words, the BCR methodology or pattern if you like, takes place when the price breaks through any support, resistance level, EMA, SMA, or any level of significance. This breakout level is significant no matter whether it’s dynamic or purely technical.
The key is to wait, be patient, let the price action come back, and confirm that the key level it’s just broken is going to support or resist the price and that the trade is indeed going to continue in the direction of your bias. Additionally, with this strategy, it’s best for you to use stop loss or a trailing stop order slightly below the retest level.
This is without a doubt one of the most powerful, simple, and effective analysis methods out there. If you find the right way that this trading strategy works for you, trading will be much easier for you. Yet, it’s rarely ever spoken about! My suggestion to you is to get out there and try it out for yourself!
No matter what trading style or strategy you have in place right now, implement BCR and watch your future results performance boost. Seriously, that’s all there is to it.
Good luck and you can thank me inside the Trade Room to receive general market commentary the next time I see you.
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