Order Blocks: Chart Rules and Evidence Limits

Name the convention being applied

One common bullish convention marks a down candle before a qualifying upward displacement or break of a selected swing. A bearish convention reverses those directions. Other tools use volume pivots, internal structure or different zone-selection rules. LuxAlgo documents its own volumetric order-block implementation, illustrating why a named indicator's settings must be distinguished from a universal definition.

Specify whether the zone uses a candle's full high-low range, its body or another interval. Also specify what constitutes displacement, which swing must break and when that swing was confirmed. These choices determine what can actually be detected at a given time.

An original boundary example

Consider a hypothetical down candle with open 102, high 103, low 99 and close 100. The next completed candles advance, and a predeclared rule is satisfied only after a close above an earlier confirmed swing high of 106.

A full-candle convention marks 99 to 103. A body-only convention marks 100 to 102. If a later price falls to 102.50 and turns upward, it touched the full-candle zone but not the body-only zone. Two analysts can report different retest counts simply because their boundaries differ.

The selected down candle occurred before the confirming close above 106. A historical rectangle can be drawn back onto that candle, but it was not yet a confirmed candidate under the stated rule at that earlier time. Any trading simulation must wait until the confirmation information exists.

Define retests, expiration and failure

A zone may be considered touched at its edge, partially traversed at its midpoint or fully traversed at the far edge. Some scripts remove a zone after a close beyond it; others use wicks. LuxAlgo exposes configurable settings that affect what remains visible. A clean final chart can hide earlier zones that were invalidated.

For the full-candle example, a move through 99 could count as failure under a stated far-edge rule. Do not erase it from the study or widen the zone to 97 after the fact. Keep untouched, failed and expired candidates alongside successful-looking retests.

Do not infer an order ledger from candles

OHLC and aggregate volume do not identify the beneficial owners of trades or the remaining quantity of hidden orders. A volume label inside a rectangle is not automatically an audited measure of institutional inventory. Explaining the calculation is more defensible than treating the name order block as proof of its narrative.

Compare three-candle non-overlap rules and broader supply/demand drawing conventions. Use an unseen evaluation set if studying a retest hypothesis. A useful analysis provides reproducible boundaries and timing while keeping observed prices separate from assumptions about participants.