Premium and Discount

Also: Premium · Discount · Equilibrium

Definition

Premium and discount are the two halves of any [[Dealing Range]] divided by the 50% equilibrium line. Premium is the upper half — price is expensive relative to the range and therefore a selling zone. Discount is the lower half — price is cheap and therefore a buying zone. This framework is the core bias filter in ICT.

Key characteristics

• 50% of the dealing range is equilibrium
• Above 50% = premium; below 50% = discount
• Applies at every timeframe — HTF premium/discount overrides LTF
• All PD arrays are evaluated by which side of equilibrium they sit on
• Buy in discount, sell in premium — violation of this rule invalidates most setups
• Deep premium (upper quartile) is the cleanest short zone; deep discount (lower quartile) is the cleanest long zone

How it forms

The algorithm treats price fairness as a range concept, not a single point. The midpoint of the active range is the reference for fair value. Moves into premium telegraph distribution intent; moves into discount telegraph accumulation intent. The further price deviates from equilibrium, the stronger the opposing-side opportunity.

How to use

Overlay premium/discount on every chart. Only take long entries when price is in discount (or when a bullish PD array forms in discount). Only take shorts when price is in premium. Use the opposite extreme as the primary target, equilibrium as the first partial target. This is Haroun's sanity check before committing to any entry.

Common mistakes

• Trading bullish setups in premium because "price looks like it's going up"
• Ignoring HTF premium/discount when the LTF setup looks clean
• Failing to redraw the range after a new swing extreme invalidates the old one

Source quotes