Market StructureIntermediate#SMC#Execution
Premium & Discount Zones
P
Definition
Informal labels for the lower and upper portions of a user-defined price range, often split at its midpoint. They describe relative position within that selected range, not intrinsic value or a buy or sell instruction.
Source reviewed
- CFTC: Trading system warning opens in a new tab
Supports: CFTC explains that trading systems based on historical market data cannot guarantee profits, supporting the distinction between a range label and a verified trade outcome.
Concept Diagram
Key Takeaways
1
Premium and discount are relative coordinates inside a selected range, not a measure of intrinsic value.
2
State the range, price source, timeframe, endpoints, and calculation rule before using either label.
3
A midpoint or Fibonacci level does not establish institutional activity, a trade direction, or a high-probability outcome.
4
Test a full decision out of sample with realistic execution and loss assumptions; the label alone is not an instruction.
Practical Example
A researcher defines a BTC range from a particular exchange's daily closing low of $55,000 to high of $70,000, yielding a $62,500 midpoint. They label $58,000 as below that midpoint and $67,000 as above it, record the rule before the next period, and compare a complete decision with a benchmark. They do not call either price undervalued, overvalued, or an institutional action from the range alone.
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Related Terms
Trading
FVG (Fair Value Gap)An analyst-defined three-candle price range with no overlap between the first and third candle's wicks after a fast move. It is a chart annotation, not proof of institutional activity, unfilled orders, future liquidity, or a likely price return.
Market Structure
Change of Character (CHoCH)An informal chart label for a local price move that conflicts with a trader's chosen swing sequence. It does not provide an early warning, identify institutional activity, or predict a higher-timeframe reversal.
Market Structure
Institutional Funding CandleAn informal name for a selected candle before a later move. A candle cannot identify the trader, capital source, or an institutional decision behind that move.
Trading
Point of Control (POC)The price bin with the highest reported traded volume in a selected volume-profile calculation. It depends on the venue, data, binning method, and time window chosen.
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