Crypton Academy Season 3 Week 3- Homework Post for Professor @cryptokraze on Break Retest Break Strategy (BRB) to Trade Continuation.

Hello Steemians, I'm happy to part of the wonderful class delivered by professor @cryptokraze on Break Retest Break Strategy to Trade Continuation. This is another great strategy for technical analysis that can help us to make a good trading decision. The goal of every trader is to make a profit and not having the right strategy to capitalize on the market will only end you up in losses.

Break Retest Break Strategy

The market is found to be either trending or ranging. When the market is trending, it doesn't shoot up like a rocket in a straight line, it creates zig-zag patterns forming higher-highs and higher lows for an uptrend or lower-highs and lower lows for a downtrend. During this market structure formation, support and resistance are being created.
In the Break Retest Break Strategy, when the market is trending, there's always a pullback which is a result of profit-taking by traders. After that, we see a continuation of the original trend. These impulsive moves and pullbacks create support and resistance levels which price retest and break for a continuation of the original trend.

_{Steem/USD Chart}

From the chart above, we can see how to price pullback to retest the broken support now turned resistance in a downtrend. Normally, the general market idea is to buy at support and sell at resistance. This is not always the case, especially in a trending market. The market always continues its original trend after a minor pullback.

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BRB at Support Level

_{Break and retest of support: Steem/USD Chart}

From the chart above, we can see how the price pulled back to retest the broken support at $0.964. The idea is to get a perfect entry to capitalize on the next impulsive move. Going short on Steem at the break of the support will be a dilemma because the price will come back to retest the broken support for a lower-high. So it is better to wait for a retest of the broken support before going short on Steem. This why this strategy is called Break-Retest-Break Strategy.

Now let's look at the situation at a Resistance level.

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BRB at Resistance Level

_{Break and retest of Resistance: BTC/USD Chart}

From the chart above, we can clearly see the setup of BRB at a resistance level. On the 10th of April, BTC broke its all-time high at $59.7K to continue its bullish trend. After the break of the resistance, price came back to retest the resistance to form a support level. This retest allows traders to go long on BTC for the next impulsive move. After that, we can see BTC spike up to a new all-time high at $64.9K.

BRB Strategy Trade Entry Criteria for a Buy Position

For a buy entry position, the market could be a ranging market or a trending market approaching a resistance level.

Mark this resistance level and wait for price to break it and form a swing high point.
Price is expected to come back and retest this broken resistance to turn to support for a continuation of the uptrend.

After price has retested this broken resistance, there's a reversal to the original trend. To take a buy position, wait for price to break the recent swing high and take a buy entry just above the swing high point.

This can be illustrated in the chart below.

_{BRB Strategy Buy Entry: BTC/USD Chart}

From the chart, we can see a clean setup of BRB Strategy for a buy position. Price broke a resistance level at $32.5K with a bullish engulfing candle. Price then form a swing high point after the break and then came back to retest the resistance level that turned support.

After that, price reversed to the upside but didn't break the swing high point. We won't be looking for a buy entry because price didn't break the swing high.

Taking an entry would have put you in a drawdown or even hit your stoploss. So the best idea is to wait for price to break the swing high before taking a buy position. So, price went back to retest the broken resistance again before breaking the swing high point. Now, we will be taking a buy entry a few points above the break of the recent swing high.

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BRB Strategy Trade Entry Criteria for a Sell Position

For a sell entry position, the market could be a ranging market or a trending market approaching a support level.

Mark this support level and wait for price to break it and form a swing low point.
Price is expected to come back and retest this broken support to turn to resistance for a continuation of the downtrend.

After price has retested this broken support, there's a reversal to the original trend. To take a sell position, wait for price to break the recent swing low and take a sell entry just above the swing low point.

This can be illustrated in the chart below.

_{BRB Strategy Sell Entry: BTC/USD Chart}

From the chart, we have a situation where price broke a support level on BTC/USD. After this breakout, price is expected to come back and retest the broken support to turn to a resistance forming a swing low point as indicated in the chart.

After the retest, price reversed back to continue the downtrend. Remember for a sell entry, we have to wait for price to break above the recent swing low point. From what we have on the chart, price consolidated a little before breaking the swing low point. We just have to be patient and wait for the strategy to play out. After the consolidation, price broke the swing low point and that gives the perfect entry opportunity for a sell position.

Trading is a game of patience and discipline. Always allow your strategy to unfold and play out before taking an entry. This will help you minimize losses and avoid fakeouts in the market

BRB StrategyTrade Exit Criteria for a Buy Position

Trading is a game of probability. There's no guarantee that our strategy will play out and there's no guarantee that the market will go in our favor. Similarly, we are not planning to hold trades for a very long time or hold trades forever. Our goal is to make a profit and look for another opportunity in the market.

For these reasons, we must have an exit position to take profit and also an exit position to take losses when the market goes against our prediction. In this section, I will talk about the exit criteria for BRB Strategy.

Exit criteria for Take profit

When we open a position, the goal is to make a profit. We should have defined exit criteria to take profit from the market. There are situations where we see our winning trades come back to losses and also maybe we close at breakeven.

For BRB strategy, the first profit level should be 1:1 RR (the risk-reward ratio). This means that our take profit level should be equal to the stoploss level.

Exit criteria when for stoploss

In BRB Strategy, many uncertainties in the market can make the market go against us. For this reason, we need exit criteria when the market is against our favor to minimize our losses and also protect our capital.

For BRB Strategy, stoploss should be placed below the previously broken resistance. This area is considered as an important market structure point and if price should break the resistance again, this means that the setup for a bullish trade is invalidated. Therefore, we need to exit the trade at this point.

The exit criteria for the Buy position can be further illustrated in the chart below.

_{BRB Strategy Buy Exit Criteria: BTC/USD Chart}

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BRB StrategyTrade Exit Criteria for a Sell Position

Exit criteria to take profit

Just like in the Buy position, the take profit is recommended to be 1:1 RR (the risk-reward ratio) for a sell trade. This means that the take profit is equal to the stoploss. With this, a trader can book profits faster and look for another opportunity in the market. Rather than holding trades for several hours or days. But this depends on your trading style and your experience in the market.

Exit criteria when for stoploss

For BRB Strategy for a Sell position, stoploss should be placed above the previously broken support. This area is considered as an important market structure point and if price should break above the support again, this means that the setup for a bearish trade is invalidated. Therefore, we need to exit the trade at this point.

The exit criteria for a Sell position can be further illustrated in the chart below.

_{BRB Strategy Sell Exit Criteria: BTC/USD Chart}

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Note: For the risk-reward ratio, most traders can decide the ratio based on their trading plan and also the number of positions they take. But first, take profit level should be 1:1 RR. After this is hit, the trader can decide to secure some part of the profits and move stoploss to breakeven to continue riding the trend. As I said, it all depends on your trading plan.

Demo Trades Using BRB Strategy

Note: This trade will be analyzed on Tradingview and the execution will be carried out on MetaTrader5 platform using liteforex demo account.

XRP/USD Trade on 1 Minute Chart

On XRP/USD 1minute chart, I noticed price have broken a resistance level at $0.6025. I waited for price to create a swing high and retest the broken resistance. After price created a swing high and retested the broken resistance, price reversed back up to break the recent swing high with a strong bullish candle. I waited for the candle to close before taking a buy trade to avoid a fake-out. After the candle closed, I took a buy trade with 1:1 RR. Stoploss was set below the broken resistance level at $0.6004. This can be illustrated in the chart below.

_{BRB Strategy: XRP/USD Chart}

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_{Trade Execution on MetaTrader 5}

The position is still open and running in loss. But this trade will only be invalidated when price comes back to break below the broken resistance. That is when I will exit the market automatically as price will hit my stoploss.

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BTC/USD Trade on 1 Minute Chart

Looking at BTC/USD 5 minutes chart, I notice price broke above a resistance level at $32.2K. I waited for a swing high to be created and also for price to come back and retest the broken resistance. After price has retested the previous resistance now turned support, I waited for price to come back up and break the recent swing high before I took a buy position. The risk-reward ratio was 1:1 and stoploss was placed below the previous resistance at $32.17K.

_{BRB Strategy: BTC/USD Chart}

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_{Trade Execution on MetaTrader 5}

This position is still open on MT5. I have already set my exit criteria for the trade and I will be exited automatically when price hits either my take profit or my stoploss.

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Trade Result

After 4hours I opened both positions, Take profit was hit and I got exited automatically from the market. I was almost stopped out on XRP/USD but my stoploss was placed at a strategic position. Both trades were profitable as I made $10.10 on XRP/USD trade and also $34.87 on BTC/USD trade. This can be seen below.

_{Take profit hit : BTC/USD Chart}

_{Take profit hit : XRP/USD Chart}

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Conclusion

BRB Strategy is a wonderful strategy a trader can utilize to capitalize on price breakouts. This strategy gives you a perfect entry opportunity and also a perfect exit strategy to protect your trades from unnecessary losses.
In other words, there is no guarantee that the market will always go in our favor and we might fall to market manipulations of fake breakouts. This is why the use of stoploss is very important in any trading plan. BRB Strategy has given us a good exit plan by placing stoploss below resistance level for a buy position and above support level for a sell position.

Thank you professor @cryptokraze for this wonderful Strategy.