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In this discussion, we will develop an indicator to identify price zones created by strong market activity, such as impulsive moves, structure shifts, and liquidity events. These zones represent areas where the market has left “memory” due to unfilled orders or rapid price displacement. By marking these regions on the chart, the indicator highlights where price is statistically more likely to revisit and react in the future.

Displacement Zones focus on identifying areas where price moved with strong intent and urgency. These zones are formed by large impulsive candles whose range is significantly greater than the average for that period, often exceeding a multiple of the ATR. To ensure the move represents genuine displacement rather than normal volatility, the candle should show minimal overlap with surrounding candles, meaning most of its range exists outside the prior candle’s range. This combination of expanded range and low overlap highlights areas where price moved too quickly, leaving behind unfilled activity that the market may later revisit.

Structure Transition Zones are created at key moments when the market shifts its behavior, commonly referred to as a Change of Character (CHoCH). These zones form at the point where a prior market structure is broken, such as when a swing high is taken out in a downtrend or a swing low is broken in an uptrend. The area surrounding this structural break often becomes significant because it represents a transition in control between buyers and sellers, making it a potential zone where price may return to reassess that shift.

Author: Hlomohang John Borotho