# Level Interaction Rules Also known as: break-and-close, wick rejection, retest. A Support/Resistance & Levels concept (Horizontal S/R) in the LuxAlgo Library, with 6 indicator implementations. ## What are Level Interaction Rules? Level interaction rules are the criteria that classify what price actually did at a level. 'Price came to support' is not an event; a wick through that closes back above, a full-bodied close below, and a quiet touch-and-go are three different events with three different meanings. The standard vocabulary covers the test (price reaches the level), the wick rejection (intrabar penetration with a close back on the original side), the break-and-close (a candle body finishing beyond the level), the [retest](https://www.luxalgo.com/library/concept/retest/) (a return to a broken level from the other side), and the reclaim (a break that fails and closes back through). Codifying interactions matters for two reasons. First, the same level carries opposite messages depending on the event: a wick rejection argues the level is defended, while a break-and-close followed by a held retest argues for [role reversal](https://www.luxalgo.com/library/concept/role-reversal/), old support acting as new resistance or the reverse. Second, precise rules make levels testable: an alert or a backtest has to know whether a break requires one close, two closes, a close a minimum distance beyond, or a higher-timeframe close. No rule set removes failure. Wick-based rules trigger early and absorb more false signals; close-based rules confirm late and give up entry price. ## How to read a level interaction Reading an interaction is a sequence, not a snapshot; the bars after the touch decide the classification. 1. Treat the level as a band, not a tick: give it a tolerance (a few ticks, a percentage, or an ATR fraction) so near-misses and small overshoots do not flip the reading. 2. Classify the first penetration: wick-only with a close back on the original side reads as rejection; a candle body closing beyond reads as a provisional break. 3. Check the follow-through: a break that holds on the next bar or two strengthens the case, while a prompt close back through the level is a reclaim and warns of a [false breakout](https://www.luxalgo.com/library/concept/false-breakout/). 4. If the break holds, watch the return: a retest that holds from the far side supports role reversal, and it is where many traders actually enter. ## How traders use it - [Breakout confirmation](https://www.luxalgo.com/library/concept/breakout-confirmation/): requiring a body close beyond the level, or two consecutive closes, filters out wick-through fakeouts at the cost of later entries. - Rejection fades: long wicks through a level that close back inside are traded as evidence of absorption, especially when the poke ran obvious stops in a [liquidity sweep](https://www.luxalgo.com/library/concept/liquidity-sweep/). - Retest entries: entering on the return to a broken level rather than on the break itself gives better location and a natural stop just beyond the level, in exchange for missing moves that never come back. - Automation: exact interaction definitions are what let indicators label breaks, retests, and reclaims consistently, and let backtests measure how a market actually behaves at its levels. ## Level Interaction Rules vs related concepts - **Retest** (https://www.luxalgo.com/library/concept/retest/): The retest is one event inside the interaction taxonomy: the return to a broken level. Interaction rules cover the full set, from first touch to reclaim, and define when a retest counts as held. - **False Breakout** (https://www.luxalgo.com/library/concept/false-breakout/): A false breakout is the after-the-fact diagnosis; interaction rules are the real-time criteria. The reclaim rule, a close back through a broken level, is how the failure gets caught as it happens. - **Liquidity Sweep** (https://www.luxalgo.com/library/concept/liquidity-sweep/): A sweep is the order-flow narrative for a wick through a level that snaps back: stops were run. The interaction rule describes the same bar mechanically, without claiming why it happened. ## FAQ ### What counts as a confirmed break of a level? The most common rule is a candle body closing beyond the level, not just a wick. Stricter versions demand two consecutive closes, a close a set distance beyond (often an ATR fraction), or a close on a higher timeframe. Every added condition trades speed for reliability: fewer fakeouts, worse entry prices, and some moves missed entirely. ### Why wait for a retest instead of trading the breakout? Location and risk. A retest entry is at the level with a stop just beyond it, while a breakout entry chases distance from the level with a wider stop. The cost is coverage: strong breaks sometimes never return, so retest traders skip some of the best moves. Many split the difference with partial entries. ### Does a wick rejection mean the level will hold? No. A rejection shows responsive buyers or sellers were present on that test, nothing more. Levels frequently hold several tests and then fail, and repeated probing can erode the resting interest that defended them. Read a rejection as one piece of evidence and weigh it alongside trend, volume, and how fresh the level is. ## Implementations in the Library - Breakouts with Tests & Retests (LuxAlgo): https://www.luxalgo.com/library/indicator/breakouts-with-tests-retests/ - Long Wick Detector (LuxAlgo): https://www.luxalgo.com/library/indicator/long-wick-detector/ - POC Sweep Reclaim (LuxAlgo): https://www.luxalgo.com/library/indicator/poc-sweep-reclaim/ - Support & Resistance Pro Toolkit (LuxAlgo): https://www.luxalgo.com/library/indicator/support-resistance-pro-toolkit/ - Support and Resistance Signals MTF (LuxAlgo): https://www.luxalgo.com/library/indicator/support-and-resistance-signals-mtf/ - Support and Resistance Levels with Breaks (LuxAlgo): https://www.luxalgo.com/library/indicator/support-and-resistance-levels-with-breaks/ ## Related concepts - S/R Zone: https://www.luxalgo.com/library/concept/s-r-zone/ - Level Clustering Algorithms: https://www.luxalgo.com/library/concept/level-clustering-algorithms/ - Support Level: https://www.luxalgo.com/library/concept/support-level/ - Resistance Level: https://www.luxalgo.com/library/concept/resistance-level/ - Level Freshness & Decay: https://www.luxalgo.com/library/concept/level-freshness-and-decay/ - Round Numbers: https://www.luxalgo.com/library/concept/round-numbers/ - Role Reversal: https://www.luxalgo.com/library/concept/role-reversal/ --- Source: https://www.luxalgo.com/library/concept/level-interaction-rules/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/