Dividing a price range into halves to identify overpriced (premium) and underpriced (discount) areas.
Premium and discount zones split the current trading range using the 50% level (equilibrium). Everything above 50% is premium — price is expensive relative to the range. Everything below 50% is discount — price is cheap. Smart money traders buy in discount zones and sell in premium zones, aligning entries with institutional logic.
Trading from discount zones (for longs) or premium zones (for shorts) gives you a mathematical edge. It ensures you’re buying low and selling high within the current context. Combined with order blocks and FVGs, premium/discount analysis creates high-probability setups.
The current swing range is $80 (low) to $100 (high). Equilibrium is $90. A pullback to $85 is in the discount zone — a good area to look for long entries. A rally to $95 is in the premium zone — a good area to look for shorts or take profit.
The range is split at the 50% level. Buy in the discount zone (below 50%) and sell in the premium zone (above 50%).