Displacement

The rules

1. Body over wick: the body is most of the candle and it closes near the high or the low.
2. One direction: consecutive candles push the same way with little overlap.
3. Size: clearly bigger than the recent candles, often about twice the average range.
4. It breaks structure: a swing high or low gets taken out by a body close.
5. It leaves a gap: a fair value gap is the footprint of real displacement.
6. No displacement, no trade. Without it, the break is likely noise.

How to mark it

1. Compare the candle with the last 10 to 20 candles: is it clearly bigger?
2. Check the close: near the extreme, not in the middle of the range.
3. Check the wicks: small against the body.
4. Confirm it broke a swing high or low with a body close.
5. Mark the fair value gap it left; that is your entry zone.

The 1:3 trade

Entry when price returns into the fair value gap left by the displacement. Stop above the swing high where the move started. Target the old low below. Reward is exactly three times the risk.

Before you enter

• The move came from a clear swing high or low
• Candles closed near their extreme, not mid-range
• Structure broke with a body close
• A fair value gap was left behind
• Stop beyond the origin of the move, target the next liquidity

Common mistakes

• Treating any large candle as displacement
• Ignoring long wicks and mid-range closes
• Chasing the displacement candle instead of waiting for the gap
• Trading a break that left no fair value gap
• Placing the stop inside the displacement leg

Key terms

• Displacement: fast, large-bodied move that shows intent
• Noise: big range without a clean close or follow-through
• Fair value gap: the imbalance displacement leaves behind
• BOS: a body close beyond a swing point
• Origin: the swing where the displacement started
• R:R: reward divided by risk; 1:3 means 3R for 1R risked

Big bodies, close at the extreme, one direction, structure broken, gap left behind. Anything less is noise.