Price Displacement
Category: Position
Formula
displacement = log(ratio_price / MA(ratio_price, window))
Expressed as a percentage.
Intuition
Displacement measures how far the rubber band is stretched. A market near equilibrium has displacement near zero. A large positive or negative value means the ratio has moved far from its recent average and now needs either structural confirmation or flow support to continue.
What It Answers
Are we stretched?
How far the current ratio price has deviated from its recent moving average.
Visual Representation
- Panel: Ratio or structure context chart, usually as an overlay or signed indicator
- Display: signed percentage from recent equilibrium
- Companion read: Depth, Trade Flow, and SLS
Behavioral Interpretation
| Condition | Interpretation |
|---|---|
| IF displacement near 0 | THEN market is near equilibrium |
| IF displacement positive and increasing | THEN the ratio is extending upward |
| IF displacement negative and increasing in magnitude | THEN the ratio is extending downward |
| IF displacement high and flow strong | THEN continuation risk increases |
| IF displacement high and flow weak | THEN exhaustion risk increases |
Failure Modes
- Window sensitivity can make the signal too noisy or too slow.
- Persistent trends can keep displacement elevated without implying reversal.
- Low-volatility regimes can hide latent instability behind small displacement.
Interactions
With Depth: High displacement with thin opposing depth favors continuation. High displacement with thick opposing depth favors rejection or absorption.
With Trade Flow: High displacement plus strong flow means the move is still being funded. High displacement plus fading flow points toward exhaustion.
With SLS: Rising gravity aligned with displacement confirms structure. Opposing gravity signals friction.
With Centroid: Displacement shows price stretch. Centroid shows where structural pressure sits. Alignment between them improves read quality.