In this article, we will consider in detail the concept of tests, retests, the differences between these concepts in different analysis methods, and also give examples on graphs.
A correct understanding of all terms is a critical skill for a trader. After all, with misunderstanding even the most basic terms, a trader cannot learn new methods to improve the effectiveness of the strategy and analysis. This means that it is extremely difficult to improve from this position.
Without further ado, let’s get down to business:
A test is a price reversal from something determined by the analysis method.
If we are talking about technical analysis, then a trend test is a price touching the line and a reversal from it.
It is generally accepted that in this way a figure/setup/situation confirms its strength, and continues to work.
A retest in technical analysis is a return to a structure that has worked itself out. The trend line had 3 tests, after which the price broke through it, and went to retest (touched the same trend line from the other side)
Here is an example:
But what if we are talking about other methods of analysis?
In VSA, testing is the price movement in one direction or another. You can “test” the strength of sellers or buyers by moving the price in one direction. If the price has passed a small distance on a large volume, the buyer/seller is strong.
Now you understand the meaning of the concepts “test” and “retest”. Thanks to this knowledge, learning new trading strategies is greatly simplified, and it becomes more pleasant to talk with professional traders. With a little more learning, you will be able to create your first trading strategy, you are on a great track!