What is Displacement?

Displacement refers to a significant price movement that takes the price away from its typical or established range. This move usually exceeds the normal fluctuation patterns and can suggest that a new trend is starting or that there is a change in market sentiment.

Characteristics of Displacement

  • Sudden and Sharp Movements: Displacement is marked by rapid and considerable movements in price over a short period.

  • Break from Ranges: It typically involves a break from a well-established trading range or level.

  • Volume Increase: Often accompanied by an increase in trading volume, indicating strong trader interest.

  • Sign of Market Sentiment Shift: A displacement could indicate a shift in the dynamics of the market, possibly due to news, events, or changes in market conditions.

Trading with Displacement

Incorporating displacement into your technical analysis can provide you with potential entry and exit points. By recognizing a move as displacement, you may anticipate continuation or reversal of the trend and adjust your strategies accordingly.

Keep in mind that no single indicator should be used in isolation, and displacement is most effective when combined with other tools and analysis methods for confirming trades.

Example of Displacement:

Last updated