Not every break of a high or a low means the same thing. Sometimes price creeps through a level in small, overlapping candles. Sometimes one or two large candles tear through it and leave gaps behind. ICT traders call the second kind displacement. It is one of the simplest ways to tell a real shift in order flow from noise.
What displacement means
Displacement is a strong, one-sided move: one or a few candles with big bodies, small wicks and little overlap. It shows that one side was aggressive enough to push price away fast. The moves that matter most are the ones that also break something, such as a recent swing point or a liquidity level.
Two things usually come with it:
- A gap in the candles. Fast moves skip prices, which leaves a fair value gap or a volume imbalance.
- A break of structure. The move closes beyond a swing, so it is often the candle that creates the market structure shift.
How the ICC Charts engine measures it
"Strong" is a feeling on a chart, so the engine turns it into a rule that can be checked. A candle counts as displacement when both of these are true:
- Its body is at least 1.5 times the ATR (average true range, 14 candles). The ATR used is the one from the previous candle, so a huge candle cannot raise its own yardstick.
- The body is at least 60 % of the candle's full high-to-low range, so most of the candle is body and not wick.
A bullish candle that passes both tests is a bullish displacement; a bearish one is bearish. You can switch this on in the terminal with the Displacement + VI layer, which draws a marker on each displacement candle.
A gold example with numbers
XAUUSD on the 5-minute chart, ATR about $2.00:
- Price sweeps a low at 3,990, then closes back above it. That is a liquidity raid on the sell side.
- The next candle opens at 3,991 and closes at 3,996, with a high of 3,997. The body is $5, more than 1.5 × $2 = $3, and $5 of a $6 range is about 83 % body. That is a bullish displacement.
- Compare it with a candle that opens at 3,991 and closes at 3,993 with a high of 3,997 and a low of 3,989. The body is $2, under $3, and only 25 % of the range. It is a normal candle, not displacement.
The numbers are only an illustration. The point is that the rule does not depend on how the candle looks to you today.
Volume imbalance, the quieter cousin
A fair value gap needs a gap between the wicks of candles one and three. A volume imbalance (VI) is smaller: two neighbouring candles whose bodies do not overlap, while their wicks still touch. In the engine, a bullish VI is the area between the body top of the first candle and the body bottom of the second. The same layer draws these as grey boxes labelled VI. They show that the move was quick, and traders watch them as small areas where price may react when it returns.
Why displacement matters in a setup
- It filters structure breaks. The engine records whether an MSS came with displacement. A shift driven by a big candle is stronger than one that drifts through the level. See BOS vs CHoCH for the close rule.
- It builds the entry. Models such as M2, the ICT 2022 Mentorship Model, want a raid, then a shift with displacement, then an entry back in the gap that move left. The models page lists each one.
- It turns old blocks into breakers. When displacement runs through an order block, that block can fail and flip; see order blocks and breakers.
Common mistakes
- Calling any big candle displacement. A large candle after a news spike with long wicks fails the body test. Size alone is not enough.
- Ignoring where it happens. Displacement out of a quiet range at a random time is weaker than displacement right after a sweep, inside a killzone.
- Chasing it. By the time the candle has closed, price is already away from the level. Many traders wait for a pullback into the gap instead of entering at the top of the move.
- Using one time frame. A displacement on the 1-minute chart can be a pause inside a 1-hour trend.
Practise it
Open any chart in the terminal, turn on the Displacement + VI layer together with Market Structure, and scroll back through a few days. Count how many structure breaks had a displacement candle and how many did not, and note what price did next. You can also train your eye with the free Chart Challenge, which uses real candles.
Education only. ICC Charts is not affiliated with Inner Circle Trader (Michael J. Huddleston); these ideas are explained in our own words. Displacement is not a signal on its own. Trading involves risk; practise on a demo account first.
Open ICC Charts in your browser, free, with the ICT and VSA layers and the model scanner. Or practise on past charts in the free Chart Challenge game.
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