Premium and Discount Zones

What Are Premium and Discount Zones

Premium and Discount zones divide any price range into two halves using the 50% level (equilibrium). The zone above the 50% is Premium (expensive, ideal for selling) and the zone below the 50% is Discount (cheap, ideal for buying).

How to Calculate Them

1. Identify the relevant range: from the swing low to the swing high of the current move.
2. Calculate the 50% of the range: (High - Low) / 2 + Low.
3. Discount zone: from the swing low to the 50%. Look for longs here.
4. Premium zone: from the 50% to the swing high. Look for shorts here.
5. The Fibonacci levels at 61.8%, 70.5%, and 79% within each zone are the most optimal.

How to Use It in Trading

• In a bullish trend, only look for longs in the Discount zone (below the 50%).
• In a bearish trend, only look for shorts in the Premium zone (above the 50%).
• An Order Block in the Discount zone is a high-probability long entry.
• An FVG in the Premium zone is a high-probability short entry.
• Avoid buying in Premium or selling in Discount: you are trading against institutional logic.

Relationship with Fibonacci

Premium/Discount zones align with Fibonacci retracements:

• 0%-50%: Discount (longs). The 61.8-79% levels are OTE.
• 50%: Equilibrium. Neutral zone.
• 50%-100%: Premium (shorts). The 61.8-79% levels are inverted OTE.