Premium & Discount

What is Premium & Discount?

Premium and discount is the SMC/ICT convention for pricing a range. Take the dealing range (the leg between a meaningful swing low and swing high) and split it at 50%. The midpoint is equilibrium; everything above is premium, everything below is discount. It is 'buy low, sell high' made mechanical: longs are only hunted in the lower half of the range and shorts in the upper half, because that is where a trade back toward and beyond equilibrium offers acceptable risk-reward.

The framework is context, not a signal. In bullish conditions the model waits for a retracement into discount, then looks for a PD array (an order block, a fair value gap) to enter from; bearish conditions mirror this in premium. Equilibrium itself is watched as a magnet and a decision level: a market that keeps hesitating around 50% is telling you it is balanced.

How traders use it

• As a filter that removes chasing: no longs in premium, no shorts in discount, judged against the dealing range that matters on your timeframe. Its main value is what it stops you from doing at the extended end of a leg.
• As an entry-stacking zone: arrays in discount (for longs) are generally ranked higher the deeper they sit; the optimal trade entry pocket, roughly the 62–79% retracement, sits below equilibrium by construction.
• As a target ladder: from a discount entry the first objective is typically equilibrium, then premium-side liquidity such as the old high, with the mirror for shorts. Typically, not always: trending markets can spend a long time on the 'wrong' side of 50% without ever rebalancing.