Displacement Calculator
Calculate displacement with our free Displacement Calculator. Compare rates, see projections, and make informed financial decisions.
Displacement Calculator
Calculator
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Formula: Displacement Ratio = Candle Range / ATR; Body-Range Ratio = |Close - Open| / (High - Low) * 100
Worked example — Strong displacement: 87.5% body ratio, 1.33x ATR, 12.5% wick ratio
Formula
Displacement Ratio = Candle Range / ATR; Body-Range Ratio = |Close - Open| / (High - Low) * 100
Displacement quality is measured by comparing the candle range to the Average True Range and by evaluating how much of the candle is body versus wicks. Higher body ratios and larger ATR multiples indicate stronger institutional displacement.
Worked Examples
Example 1: Strong Bullish Displacement on EUR/USD
Problem:A EUR/USD candle prints: Open 1.0850, Close 1.0920, High 1.0925, Low 1.0845. ATR is 0.0060. Analyze the displacement quality.
Solution:Candle Range = 1.0925 - 1.0845 = 0.0080 (80 pips) Body Size = 1.0920 - 1.0850 = 0.0070 (70 pips) Body-to-Range Ratio = 0.0070/0.0080 = 87.5% Displacement Ratio = 0.0080/0.0060 = 1.33x ATR Upper Wick = 1.0925 - 1.0920 = 0.0005 Lower Wick = 1.0850 - 1.0845 = 0.0005 Wick Ratio = (0.0005+0.0005)/0.0080 = 12.5%
Result:Strong displacement: 87.5% body ratio, 1.33x ATR, 12.5% wick ratio
Example 2: Weak Bearish Displacement on GBP/USD
Problem:GBP/USD candle: Open 1.2700, Close 1.2660, High 1.2720, Low 1.2650. ATR is 0.0080. Analyze quality.
Solution:Candle Range = 1.2720 - 1.2650 = 0.0070 (70 pips) Body Size = 1.2700 - 1.2660 = 0.0040 (40 pips) Body-to-Range Ratio = 0.0040/0.0070 = 57.1% Displacement Ratio = 0.0070/0.0080 = 0.88x ATR Upper Wick = 1.2720 - 1.2700 = 0.0020 Lower Wick = 1.2660 - 1.2650 = 0.0010 Wick Ratio = (0.0020+0.0010)/0.0070 = 42.9%
Result:Weak displacement: 57.1% body ratio, only 0.88x ATR, 42.9% wick ratio
Frequently Asked Questions
What is displacement in ICT and SMC trading concepts?
Displacement in ICT (Inner Circle Trader) and SMC (Smart Money Concepts) trading refers to a strong, aggressive price move that indicates institutional or smart money involvement. It is typically characterized by large-bodied candles with minimal wicks, showing that price moved decisively in one direction without significant opposition. Displacement candles demonstrate that smart money has committed capital to move price away from a particular level or zone. When you see displacement, it often signals the creation of fair value gaps, order blocks, and breaker blocks. Traders use displacement to confirm the direction of institutional order flow and to identify high-probability trading zones where price is likely to return for a retest before continuing in the displacement direction.
How do you identify a valid displacement candle on the chart?
A valid displacement candle has several key characteristics that distinguish it from ordinary price action. First, the candle body should constitute at least 60-70% of the total candle range, meaning the wicks are small relative to the body. Second, the candle range should be significantly larger than the average true range, typically 1.5 times or more the ATR. Third, the candle should close near its extreme, meaning a bullish displacement closes near the high and a bearish displacement closes near the low. Fourth, displacement often occurs in clusters of two or three consecutive strong candles in the same direction, creating what ICT calls a leg of displacement. Finally, valid displacement usually originates from a known institutional reference point such as an order block, fair value gap, or liquidity pool.
What is a fair value gap and how does displacement create one?
A fair value gap (FVG) is a three-candle pattern where the middle candle is so large that a gap exists between the wicks of the first and third candles. This gap represents a price range where trading occurred only in one direction, creating an imbalance that the market often returns to fill. Displacement creates fair value gaps because when smart money aggressively pushes price, the move is so fast that buyers and sellers at intermediate prices never get matched. The market considers this inefficient, and price frequently retraces to these gaps before continuing in the original direction. Traders use fair value gaps as entry zones, placing orders within the gap and setting stops beyond the displacement origin. The probability of a fair value gap being respected increases when the displacement that created it was particularly strong.
How should traders use the body-to-range ratio in displacement analysis?
The body-to-range ratio measures the percentage of a candle range that is occupied by the body versus the wicks. For displacement analysis, a ratio above 70% is considered excellent, indicating decisive directional movement with minimal rejection. A ratio between 50-70% is acceptable but suggests some opposing pressure during the move. Below 50% typically indicates the candle had significant wicks, which weakens the displacement signal because it shows that opposing orders were being filled during the move. When using this ratio, combine it with the ATR comparison for a complete picture. A candle with a 75% body-to-range ratio but a range smaller than the ATR is just a clean but normal candle, not true displacement. The combination of a high body-to-range ratio and a range exceeding 1.5x ATR produces the most reliable displacement signals.
Can displacement analysis be applied to all timeframes and markets?
Displacement analysis can be applied across all timeframes and markets, but its reliability and interpretation vary. On higher timeframes like daily and 4-hour charts, displacement carries more weight because it represents larger capital commitments by institutional participants. On lower timeframes like 1-minute and 5-minute charts, displacement may reflect short-term algorithmic activity rather than genuine institutional positioning. In forex markets, displacement often occurs around major news events, session opens, and liquidity sweeps. In equities, it frequently appears at market open, around earnings releases, and at key support and resistance levels. Cryptocurrency markets tend to show more frequent displacement due to lower liquidity and higher volatility. Regardless of market, always confirm displacement with context such as the location on the higher timeframe structure, time of day, and whether known liquidity was taken before the move.
Why is the Average True Range used as the benchmark instead of a fixed pip threshold?
A fixed pip threshold cannot travel between instruments or volatility regimes. Eighty pips is an enormous candle on EUR/USD during a quiet Asian session and unremarkable on GBP/JPY during a London news release. ATR normalises the candle range against the instrument's own recent volatility, so the displacement ratio expresses how unusual this move is for this market right now. That is why the calculator divides candle range by ATR: a ratio of 1.0 means an ordinary bar, while 2.0 or more means the range doubled the recent norm and genuine imbalance is likely.
What is the difference between displacement and a simple breakout candle?
A breakout candle is defined by location — it closes beyond a prior swing high, trendline, or range boundary — while displacement is defined by character: an outsized body, small wicks, and a range far above ATR. The two overlap but are not the same. A breakout can be slow and wicky, which usually signals absorption rather than commitment. Displacement can also occur mid-range with no level broken. The strongest setups combine both: displacement that also breaks structure, which ICT traders call a break of structure or market structure shift.
How does the wick ratio change the reliability of a displacement signal?
Wicks record prices that were reached and then rejected, so a high combined wick ratio means opposing orders were absorbing the move while it happened. Displacement Calculator scores a wick ratio of 20 percent or less most favourably because it implies the candle held its extreme into the close. Between 20 and 35 percent the signal is usable but the imbalance is partly repaired within the same bar. Above 35 percent, the candle looks more like a liquidity sweep or exhaustion wick than committed institutional order flow, and any fair value gap it leaves is likely to be shallow.
When should you wait for the retracement into the fair value gap instead of entering on the displacement candle itself?
Entering at the close of a displacement candle means buying at the top of the move, which forces a stop beyond the candle's origin and gives a poor risk-to-reward ratio. Waiting for price to retrace into the imbalance the candle left behind places your entry near the origin instead, shrinking the stop distance while keeping the same target. The trade-off is that strong displacement sometimes runs without retracing. A practical compromise is to size a partial position on the close and add on the retracement into the gap, invalidating both if price closes back through the displacement origin.
How do consecutive displacement candles change the interpretation of the score?
Displacement Calculator scores one candle at a time, but institutional moves usually print as a leg of two or three strong bars in the same direction. When several consecutive candles each exceed roughly 1.5 times ATR with high body ratios, the aggregate imbalance is far larger than any single score suggests, and the fair value gaps stack into a wide zone. Conversely, a single strong candle surrounded by narrow indecisive bars is more likely a news spike that mean-reverts. Score each candle in the leg and treat the cluster, not the individual bar, as the signal.
References
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer · Editorial policy
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