Market StructureIntermediate#SMC#Execution
Premium & Discount Zones
P
Definition
Areas of price relative to a range. Premium (top 50%) is for selling; Discount (bottom 50%) is for buying.
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Concept Diagram
Key Takeaways
1
Premium zones are where price is expensive relative to a trading range — ideal for selling or shorting
2
Discount zones are where price is cheap relative to a range — ideal for buying or going long
3
Defined using Fibonacci levels: discount is below 50% and premium is above 50% of a range
4
Smart money buys in discount zones and sells in premium zones avoiding entries at the equilibrium
Practical Example
BTC ranges between $55K (low) and $70K (high). The equilibrium is $62,500. At $58K (discount zone), smart money accumulates. At $67K (premium zone), they distribute. The 50% level is avoided for entries.
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Related Terms
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FVG (Fair Value Gap)An imbalance in price move shown by a gap between candles, often filled as price seeks to rebalance liquidity.
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Change of Character (CHoCH)The first sign of an internal trend shift on low timeframes, often occurring before a major high-timeframe trend reversal.
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Institutional Funding CandleA specific candle that marks where a large institution began to fund a massive move, often serving as a future 'Point of Interest'.
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Point of Control (POC)The price level with the highest traded volume for a particular time period in the volume profile.
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