What displacement means
Displacement is a candle with a body that is large compared with recent volatility, moving decisively in one direction. The playbook measures it with the Average True Range (ATR) over the last 14 candles: a candle counts as displacement when its body is at least k × ATR, with k = 1.0 by default. Raising k demands stronger moves and produces fewer setups.
Displacement against ATR
Why only closed candles count
While a candle is forming, its body, high and low can all change. A setup built on a forming candle can appear and then disappear, which is called repainting. In historical testing it also lets information leak from the future, called look-ahead bias, so results look better than they would have been live.
For this reason every rule in the playbook reads closed candles only. Alerts and backtests use confirmed data, unless you deliberately choose intrabar behaviour and your data source supports it. When a result depends on a candle that has not closed, it is labelled provisional.
Displacement seen on 5 minutes
Displacement on the lower timeframe
On a 15-minute chart one candle can contain a sharp 5-minute move. Dropping to 5 minutes or 1 minute lets you see the displacement form and, if you choose, use a lower-timeframe structure break as the confirmation instead. A single 1-minute wick on its own is never enough.
Bullish example
- 1After a reclaim of the swept low, look for a green candle whose body is at least 1× ATR(14).
- 2Wait for that candle to close.
- 3Alternatively, wait for a 5-minute close above the last lower-timeframe swing high.
- 4Only then mark displacement confirmed.
Bearish example
- 1After a reclaim back below the swept high, look for a red candle with a body of at least 1× ATR(14).
- 2Wait for the close.
- 3Or wait for a 5-minute close below the last lower-timeframe swing low.
- 4Then mark displacement confirmed.
What confirms it?
- A closed candle with body ≥ k × ATR in the setup direction.
- Or a closed lower-timeframe break of the last opposing swing.
- It happens within the displacement window after the reclaim or break.
What invalidates it?
- The large candle shrinks back before it closes.
- Displacement arrives after the window has expired.
- The candle is large but in the wrong direction.
Common mistakes
- Judging displacement while the candle is still open.
- Using a fixed number of points instead of a volatility-relative measure.
- Treating a long wick as displacement; the body is what counts.
- Backtesting with intrabar highs and lows when live trading would only see closes.
Replay exercise
- In replay, add an ATR(14) reading or estimate it from the last 14 candle ranges.
- Step through a London session and flag every candle with a body ≥ 1× ATR.
- Check how many of them came right after a sweep reclaim or a breakout close.
Quick quiz
Pick an answer to see the explanation. Nothing is saved.