Premium & Discount
Also known as: premium and discount, PD array, premium zone, discount zone, dealing range halves
What is it?
Premium and discount describe the two halves of a price range measured from its low to its high: everything above the 50% midpoint is premium, everything below it is discount. Say EUR/USD has run between a low of 1.0800 and a high of 1.0900. Equilibrium sits at 1.0850. A long taken at 1.0820 is a discount entry - you are buying in the cheaper half of the range, with the stop below 1.0800 close by and most of the range still above you.
With the range running 1.0800 to 1.0900, equilibrium sits at 1.0850 - longs below it are at a discount, longs above it pay a premium.
The same long idea taken at 1.0885 is a premium entry: the stop is now 85 pips away and there are only 15 pips of range left overhead. Same view, very different trade. Sellers read it in mirror image, wanting to be short in premium. In practice this works as a filter rather than a signal.
It rarely tells you to enter, but it reliably tells you when an entry is in the worse half. Its main use is stacking with other concepts: an order block or unfilled gap that sits in the discount half of the range is worth far more for a long than the same zone sitting in premium. The one thing to be careful about is which swing points you measure from, because moving either end shifts equilibrium and can flip a zone from one half to the other.
Why it matters: Splitting a range at its midpoint tells you whether you are buying cheap or paying up, which is the simplest filter for avoiding entries at the top of a move.
Equilibrium = (range high + range low) / 2
It rarely produces an entry on its own, but it filters out the entries most likely to give back the move immediately.
Real-world example
With EUR/USD ranging between 1.0800 and 1.0900, the 1.0850 equilibrium made a long at 1.0820 a discount entry and the same idea at 1.0885 a premium one.
How SignalBots handles it
SignalBots signals state the entry level up front, so you can see where it sits inside the current range before committing rather than after the fill. See /risk-warning.
Pro tip
Draw the range from the swing points that actually produced the current leg - moving the high or low by one candle can flip a zone from discount to premium.
Common pitfalls
Buying into the premium half simply because the trend is up, which puts your entry near the level the move is most likely to retrace from.
Frequently asked questions
How do I choose the range to measure?
Use the swing low and swing high of the leg you are actually trading, on the timeframe that frames your setup. Because changing either end moves equilibrium, the range should be defined before the entry, not after it.
Should I only ever buy at a discount?
Treat it as a filter, not a rule. Buying in the discount half usually gives a shorter stop and better reward-to-risk, but strong trends do run from premium and never look back, so a mechanical rule will miss those.
What exactly is equilibrium?
The 50% level of the range, exactly halfway between its high and low. Above it is premium, below it is discount. It is the same calculation as the 50% Fibonacci retracement of that leg.
Does this work for selling too?
Yes, mirrored. Sellers want to enter in the premium half, above equilibrium, so their stop above the range high stays close while the distance down to the range low stays large.
How does it relate to Fibonacci levels?
Equilibrium is the 50% retracement of the range, and premium and discount are the halves either side of it. The concept is a simplified reading of a measurement most charting platforms already draw for you.
Trading involves substantial risk of loss. Historical and backtested results do not guarantee future performance. Read the full risk warning.
