Ancelotti described Davies' reading of the game, in the weekend's 3-3 draw at Manchester United, as "perfect" and has been pleased with the 22-year-old performances of late - especially during the absence of Allan.
"I think, first of all, Tom is a really professional player, really focused on what he is doing," Ancelotti said.
"He has a strong sense of belonging to this club and this is also really important.
"The only thing I said to him is to simplify his work and his style of play.
"He plays in a position where tactically you have to be really focused.
"Watching the game against United I think tactically he was perfect.
"With the ball he has maybe not the quality of a top midfielder but in that position we need to play simple passes, you don't need to over-complicate.
"Sometimes he touches the ball one or two times too much and I say to him play simple."
He added: "He cannot play No10, in my opinion, but when you play with three midfielders he can play all three positions, no problem, because tactically he is very intelligent."
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