Imbalance & Strong Price Displacement
1. Displacement (Strong displacement)
Displacement is a very fast and strong price movement in one direction. It is shown through candles with very large and long bodies and short whiskers. This is the surest sign that Smart Money is actively pushing prices and controlling the market.
2. Imbalance (Imbalance of supply and demand)
When Displacement appears, the price moves too quickly, causing supply and demand to not be able to match orders equally. This imbalance leaves a fair value gap (FVG), where only buy orders or only sell orders are executed.
📷 Figure 2.1: The strong Displacement candlestick closed decisively, creating a breakout structure and leaving an actual supply-demand imbalance gap (Imbalance) on the 1-hour Nasdaq chart.
Displacement's biggest role is confirm the validity of the structural break. A structural break without Displacement and Imbalance often has a very high failure rate.
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