Premium / Discount
The upper half of a range is expensive (premium), the lower half cheap (discount) — you buy low and sell high.
Premium and discount name the two halves of a price range, separated by its midpoint. Above that middle, price is at a premium: it is expensive relative to the range. Below it, price is at a discount: it is cheap. The notion is purely relative and gets recalculated for each range under consideration.
The principle that follows fits in one sentence: you look to buy at a discount and sell at a premium. Put that way it sounds like a platitude — but it is the filter most often missing from traders who have just learned order blocks and Fair Value Gaps.
And that is exactly where the concept becomes indispensable. A bullish order block sitting in the upper half of the range is a poor buy, however cleanly it is formed: you are paying a high price for a value zone. The same order block at a discount is a good buy. The zone has not changed; its location within the range is what decides.
How to determine it: identify the reference range — the low and high of a significant leg, or of a session. Draw its midpoint. Everything above is premium, everything below is discount. Most platforms give it to you in one gesture with the Fibonacci retracement tool, the 50% level marking the divide.
The logic is one of entry cost, not of prediction. Buying at a discount does not make the rally more likely; it makes the trade cheaper, so the stop is closer and the risk-to-reward better. It is a criterion of execution quality, not a directional signal.
How do you use it? As a filter, at the last stage of selection. Structure gives the bias, the Draw on Liquidity gives the target, the zone gives the entry — and premium/discount decides whether that entry is worth taking. A bullish setup whose entry zone sits at a premium gets passed on, however tempting it looks.
Choosing the reference range is the concept’s real difficulty. The same price can be at a premium on the last few hours’ leg and at a discount on the week’s range. The practical rule: use the range from the timeframe where you established your bias, not the one where you execute.
The classic mistake: applying the concept to a badly chosen range, usually too recent. Taking the last two hours as reference produces a midpoint that shifts constantly, and therefore a filter that validates anything at all depending on when you draw it.
Second trap: turning it into an entry signal. Being at a discount is not a reason to buy. A market in a firm downtrend spends most of its time at a discount to its previous range, and keeps falling. The filter is only worth something applied to a setup that is already valid on other grounds.