📊 What Are Premium & Discount?
Premium and Discount are two important areas within a Price Range that help traders evaluate where price is currently positioned within that range.
Simply:
Discount = Lower Half of the Range
Premium = Upper Half of the Range
The midpoint is:
50% = Equilibrium
🔹 What Is Discount?
When price is trading in the lower half of a defined range, it is considered to be in Discount.
In traditional Price Action analysis, Discount can be a more favorable area to look for Buy Opportunities — provided that market structure and other factors support the idea.
Example:
Low = 4300
High = 4500
The 50% level is:
4400
Therefore:
4300 → 4400 = Discount
4400 → 4500 = Premium
If price is at 4350, it is trading in the Discount area.
🔻 What Is Premium?
When price is trading in the upper half of a defined range, it is considered to be in Premium.
Premium can be a more favorable area to look for Sell Opportunities, but it is not a sell signal by itself.
Using the same example:
4400 → 4500 = Premium
If price is at 4470, it is trading in the Premium area.
⚖️ What Is Equilibrium?
Equilibrium represents the 50% midpoint of the range.
Formula:
Equilibrium = (High + Low) ÷ 2
Example:
High = 4500
Low = 4300
(4500 + 4300) ÷ 2 = 4400
Therefore:
4400 = Equilibrium
🎯 Why Are Premium & Discount Important?
They help traders evaluate the Location of Price before considering a trade.
For example:
Bullish Bias
→ Look for Buy Opportunities in Discount
Bearish Bias
→ Look for Sell Opportunities in Premium
However:
Premium / Discount ≠ Entry Signal
They should be analyzed together with market structure and other factors.
🧠 Premium & Discount With Market Structure
A potential bullish scenario:
Liquidity Sweep
↓
Bullish CHoCH
↓
Bullish Displacement
↓
BOS
↓
Retracement into Discount
↓
FVG / Order Block
↓
Potential Buy
A potential bearish scenario:
Liquidity Sweep
↓
Bearish CHoCH
↓
Bearish Displacement
↓
BOS
↓
Retracement into Premium
↓
FVG / Order Block
↓
Potential Sell
⚠️ Important
A common mistake is assuming:
Discount = Always Buy
or:
Premium = Always Sell
❌ This is incorrect.
Price can remain in Premium while continuing higher.
Likewise, price can remain in Discount while continuing lower.
Therefore, the analysis should consider:
Market Structure → Bias → Liquidity → Location → Confirmation
📌 Summary
Premium = Upper Half of the Range
Discount = Lower Half of the Range
Equilibrium = 50% of the Range
Simply:
Premium
🔺
50% — Equilibrium
🔻
Discount
The purpose of Premium & Discount is not to predict an entry by itself.
Instead, it helps traders evaluate where price is located within the broader market context.
Location + Structure + Liquidity + Confirmation
are more important than using any single concept in isolation.
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