Premium & Discount

The rules

1. Anchor the range on a clear swing low and swing high of the move you are trading.
2. 50% = equilibrium. It splits the range into premium and discount.
3. In an uptrend, buy only in discount. In a downtrend, sell only in premium.
4. A pullback that stays above 50% is still premium: buying there is buying high.
5. Wait for a reaction in discount (rejection wick, shift, gap) before entering.
6. Redraw the range when price makes a new swing high or low.

How to mark it

1. Pick the last clear impulse: swing low to swing high (or high to low).
2. Drag a Fibonacci tool across it and keep only the 0, 0.5 and 1 levels.
3. Shade above 0.5 as premium and below 0.5 as discount.
4. Mark the liquidity at both ends: the swing high and the swing low.
5. Plan longs only from the discount half, targeting the swing high.

The 1:3 trade

Entry on the close of the reaction candle in discount. Stop below its low. Target the swing high, the top of the range. Reward is exactly three times the risk.

Before you enter

• The range is anchored on clear swing points
• Price is in the discount half for a long (premium for a short)
• A reaction formed in that half before you entered
• Stop beyond the reaction low, not at equilibrium
• Target the opposite end of the range with at least 1:2

Common mistakes

• Buying the first shallow dip that is still in premium
• Drawing the range on random, unclear swings
• Entering at 50% without any reaction
• Shorting in discount or buying in premium
• Keeping an old range after a new swing has formed

Key terms

• Dealing range: swing low to swing high of the current move
• Equilibrium: the 50% level of the range
• Premium: above 50%; the expensive half
• Discount: below 50%; the cheap half
• Reaction: a rejection or shift that shows buyers stepped in
• R:R: reward divided by risk; 1:3 means 3R for 1R risked

Range, 50%, wait. Buy in discount, sell in premium, and let price come to your side of the line.