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Lesson 12 of 17 Premium & Discount Zones
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ICT / SMC Concepts · Lesson 12

Premium & Discount Zones

Learn how a price range can be divided around its 50% midpoint into premium, equilibrium and discount.

  • Beginner
  • Interactive charts
  • Lesson 12
01

What Are Premium & Discount Zones?

In this technical-analysis framework, traders first define a price range using a meaningful Swing Low and Swing High. That range is then divided in half.

The midpoint is Equilibrium, at 50%. The upper half is Premium. The lower half is Discount.

These words are relative to the selected price range. They do not describe intrinsic or fundamental value.

PremiumABOVE 50%
Equilibrium50%
DiscountBELOW 50%
02

First, Define the Range

Before you can find Premium or Discount, you need two meaningful points: a Swing Low and a Swing High. Together they define the range being measured.

Start with the Swing Low. Now find the Swing High. These two points define our range.

Educational values
SWING HIGH110
SWING LOW100
RANGE10
EQUILIBRIUM105

Select the Range

Find the swing low, then the swing high, then see the range they define.

Educational example

Constructed teaching data, not real market data.
03

Find Equilibrium

Split the range in half. The midpoint is Equilibrium.

Equilibrium(SWING HIGH + SWING LOW) / 2
= (110 + 100) / 2
= 105
Equilibrium = 105
ABOVE 105PREMIUM
BELOW 105DISCOUNT

Show the Midpoint

The same range. Now split it in half.

Educational example

0% is the swing low, 100% is the swing high, and 50% is Equilibrium.
04

Discount Zone

Discount

The Discount Zone is the lower half of the selected range. In the FluxCharts framework, price below the 50% equilibrium level is treated as trading in the Discount portion of that range.

Discount 50% EQUILIBRIUM DISCOUNT ▼SWING LOW
05

Premium Zone

Premium

The Premium Zone is the upper half of the selected range. Price above the 50% equilibrium level is in Premium, relative to that range.

Premium SWING HIGH▲ PREMIUM 50% EQUILIBRIUM

Premium here is a technical range concept, not a statement about fundamental valuation.

Premium, Equilibrium, Discount

The core chart of the lesson. Show each half, then both.

Educational example

The shading is light so the candles stay readable.
06

How Traders Plot the Zones

The source uses a Fibonacci Retracement tool, set to show only three levels: 0, 0.5 and 1.

Anchor the first point on the Swing Low and the second on the Swing High. The area from 0 to 0.5 is the Discount Zone. The area from 0.5 to 1 is the Premium Zone.

You do not need a Fibonacci tool to understand the idea. It is just three levels.

Three levels 1.0 — SWING HIGH0.5 — EQUILIBRIUM0.0 — SWING LOW PREMIUMDISCOUNT
07

Where Is Price Now?

Swing Low 100. Swing High 110. Equilibrium is 105. Look at the current price in each example.

Knowledge check

Example A

Current price is 103. Where is price?

Knowledge check

Example B

Current price is 108. Where is price?

Knowledge check

Example C

Current price is 105. Where is price?

08

The Range Matters

The same price can be Premium in one range and Discount in another. So first know which swing range you are analysing.

Larger range: 90 to 110 11010090 PRICE 102 PREMIUM

Midpoint 100. Price 102 is above it.

Smaller range: 100 to 110 110105100 PRICE 102 DISCOUNT

Midpoint 105. Price 102 is below it.

09

Does Premium Mean Sell and Discount Mean Buy?

Not automatically. Inside a range, price can:

Remain in PremiumIt can stay in the upper half.
Remain in DiscountIt can stay in the lower half.
Cross Equilibrium repeatedlyIt can move back and forth.
Trend through the whole rangeIt can leave the range entirely.
Create a new rangeThen the zones are redrawn.
DiscountDISCOUNT
≠ AUTOMATIC BUY
PremiumPREMIUM
≠ AUTOMATIC SELL

The source says Premium and Discount should not be traded by themselves, and suggests combining them with other analysis.

Price in Discount: Two Endings

The same range, and price in the lower half.

Educational example

The candles are identical up to the current price.

Price in Premium: Two Endings

A range measured from a swing high down to a swing low, with price in the upper half.

Educational example

The zone tells you where price sits inside the selected range, not what price must do next.
!

Common Mistakes

Marking Premium/Discount without defining a range

Correction: First identify the Swing Low and Swing High.

Using the wrong midpoint

Correction: Equilibrium is the 50% point of the selected range.

Thinking Discount means cheap, fundamentally

Correction: It only means the lower half of this technical range.

Thinking Premium means price must fall

Correction: Price can continue higher while remaining in Premium.

Using Premium/Discount as an automatic trade signal

Correction: Treat the zones as context.

?

Knowledge Check

Knowledge check

Check 1

Swing Low 100. Swing High 120. What is equilibrium?

Knowledge check

Check 2

Same range, 100 to 120. Current price is 106. Where is price?

Knowledge check

Check 3

Same range. Current price is 117. Where is price?

Knowledge check

Check 4

Does price being in Discount guarantee it should rise?

★

Your Turn

Where Is the 50% Equilibrium?

The swing low, swing high and current price are shown. Three levels are lettered.

Educational example

Which level is the 50% equilibrium?

Pick a level, or press the button to reveal the midpoint.

Knowledge check

Now the zone

The midpoint is 105. Is current price in Premium or Discount?

Second practice. A new range. Find the swing low, the swing high, the equilibrium and the current zone. Say each answer to yourself first, then reveal it.

Another Range: Quick Check

Swing low 200, swing high 240. Find them, then the midpoint, then the zone.

Educational example
Reveal one step at a time and compare with your own answers.

How to find Premium & Discount

  1. Step 1: Find the Swing Low.
  2. Step 2: Find the Swing High.
  3. Step 3: Measure the range.
  4. Step 4: Mark the 50% midpoint.
  5. Step 5: Above 50% = Premium.
  6. Step 6: Below 50% = Discount.
10

Where Can Premium & Discount Be Used?

On any timeframe. The source suggests looking at broader, higher-timeframe ranges when judging whether price is in Premium or Discount. No timeframe is universally best.

1m5m15m 1H4HDaily
✓

What You Learned

  • Premium and Discount are defined relative to a selected price range.
  • A Swing Low and Swing High define that range.
  • The 50% midpoint is called Equilibrium.
  • Above 50% is Premium.
  • Below 50% is Discount.
  • The selected range matters.
  • Premium does not automatically mean sell.
  • Discount does not automatically mean buy.
Key rule

PREMIUM / DISCOUNT = WHERE PRICE SITS INSIDE THE SELECTED RANGE. Not a guaranteed direction.

The whole lesson in one picture

SWING HIGH · 100% PREMIUM EQUILIBRIUM · 50% DISCOUNT SWING LOW · 0%
Premium / discountLOCATION INSIDE A RANGE
NotGUARANTEED DIRECTION

All lessons

01Fair Value Gaps 02Inversion Fair Value Gaps 03Order Blocks 04Breaker Blocks 05Break of Structure 06Change of Character 07Change of Character Plus 08Equal Highs 09Equal Lows 10Liquidity 11Liquidity Grabs 12 · You are herePremium & Discount Zones 13Propulsion Blocks 14Liquidity Sweeps 15Change in State of Delivery 16Balanced Price Range 17Breakaway Gap

Further reading

Educational content only — not investment advice. Premium and Discount are a technical way of describing where price sits inside a chosen range, not a statement about value, and not a prediction. All charts use constructed, illustrative data.