what is a retest in forex trading, why does it matter after a break?

A retest occurs when price breaks a key level of value meaning a support or resistance, then comes back to touch the level again before continuing in its initial direction.

Let us look at a eurusd chart through the 5-minute timeframe, the purple line shows the support level. You will notice price broke through the support level then the next candle fell back to touch the support before continuing in the upward direction.

Retests always serve as a confirmation that a support/resistance level is legit/authentic/reliable and so you can expect price not to breach it any time soon.

In the image i showed you, the trading strategy would be to open a buy trade immediately after the retest candle finishes forming.

To get a precise view of the retest candle, you can switch to a 1-minute time frame and you will spot the restest candle. After it finishes forming, you wait for the next bullish candle to form before entering your buy trade.

From the image, notice how price breaks a key support level in the downward direction, then reverses to the upward direction then unsuccessfully tries to break the same support level before roaring upwards. that is a retest.

A retest is important and matters 100% because if a retest fails to breach the key level, it gives you the comfort to know that price is not likely to breach that key level anytime soon.

Look at a trade i just took, the purple line is the key level of resistance that marked the high of the Asian session for today.

The price broke this key level and retested it and that was a signal for me to buy