What is Premium & Discount?

Splitting a price range at its midpoint: buy in the cheap lower half (discount), sell in the expensive upper half (premium).

Premium and discount is the practice of dividing a meaningful price range — usually the leg from a significant swing low to a significant swing high — at its 50% midpoint, often called equilibrium. Prices above the midpoint are premium (expensive relative to the range); prices below it are discount (cheap). The logic mirrors any market: a disciplined buyer wants to buy below fair value and a disciplined seller wants to sell above it, and institutions filling large positions behave exactly the same way.

The framework's power is as a filter, not a signal. In an uptrend, it tells you to ignore long setups that appear in premium — however tempting the order block or FVG — and to wait for price to retrace into discount before buying. Combined with structure, it prevents the classic retail mistake of buying the top of the leg. We fold this into the confluence checklist we teach: a bullish zone sitting in the discount of the range carries far more weight than the identical zone sitting in premium.