[00:02] One of the biggest reasons traders get trapped is because they buy too high and they sell too low. They see a bullish market and buy right after prices already moved to the upside. Or they see price going down and then they sell
[00:15] right into the lows. But smart traders understand premium and discount. They know when price is cheap, when price is expensive, and where they
[00:27] actually want to do business. Now, in this lesson, I want to show you how to add premium and discount, which is a very useful tool, so that you can trade with much more precision.
[00:39] Like what we covered in the previous lesson, it's easy to mark up supply and demand zones when you really understand the principles behind them. But knowing whether that zone is in a good part of the range is what separates
[00:54] good part of the range is what separates average traders from precise traders. discount. One of my favorite tool, which is so simple to use, I can't even believe that I'm dedicating a lesson towards these two because it's really
[01:07] that simple. I'm going to break it down step by step as usual. Right, so first of all, what are premium and discount? Right, premium and discount is a basic principle that can be used when we purchase goods and services and also in
[01:19] purchase goods and services and also in the financial markets. For example, when a laptop is on a discount, this means that it's cheaper than retail price. This also means that more people would want to buy that specific laptop,
[01:32] thereby there'll be an increase in demand for it. If you apply that same concept into the financial markets, you will know that when price is at a premium, ideally there's going to be supply. When price
[01:45] is within a discount range, ideally there should be demand. So now we can premium and discount to decide when to buy low and when to sell high in order to make a profit from our trades. So, the premium pricing, which is pretty
[02:01] So, the premium pricing, which is pretty much above the 50% of the range itself, this is an area where price is relatively expensive discount is an area where price is
[02:14] So, how you draw the premium and discount is to follow these three steps these three steps, I want you guys to copy my settings when it comes to this
[02:26] you guys where to get this tool. So, just go to TradingView, go to fib retracement, which is this one right here, click on it, and then you can just draw and your default one will probably look something like this, right? Looks
[02:40] very, very ugly. We don't want that. We want to change it to become premium and discount. So, what you want to do is to double click on it and then Right, so whatever I have on the screen right here, just go and copy it over.
[02:55] that right now. Now, let's talk about how to actually use them on the charts itself. the real world, but also in the
[03:10] This means that when price is in a discount zone, which is below the 50% level, below the equilibrium level of the entire range, long positions are considered high probability. So ideally, we want to look
[03:24] for longs when price gets down to a discount pricing. When price is in the premium zone, above the 50% equilibrium level, short positions are considered high probability.
[03:39] This is how institutional traders, they sell high and they buy low. They wait for price to come down at a discount, then they scoop it all up. And then once when price is already in a premium pricing, they know that it's expensive
[03:53] right now, so they short it down. And how you use it is, like I said, just here. First of all, go and identify the market break of structure or a bearish break of structure. Once that's happened, then
[04:10] you can identify the swing low and the swing high, which is a swing range. Now, what you want to do is to just drag this premium and discount tool, just like this, from the swing low to the swing high, or vice versa. I'm just
[04:26] get this ugliest thing out of my way. So, yeah, you can see, that's how you do it, right? You pretty much just drag the premium and discount tool. Let it again. Let me just delete this. Right, just take the premium and
[04:40] discount tool, drag it from the swing low or to the to the swing high, like what order you do it in, right? Because that, okay, this is the entire range, above the 50% level, we are in a
[04:54] premium, below the 50% level, we are in a discount. So, this is where you will be able to know that if price is above the equilibrium level, right? This middle line that you can see on the screen
[05:07] right now. If price is currently, let's say, somewhere around here, then we know And we know that price will potentially go down even further, and this is where pullback until price comes down to the discount
[05:23] pricing. But the minute price comes down, goes below the equilibrium level, now price has officially entered into discount territory, which means that here. Right, so at any point of time, it could just reverse and head back up,
[05:38] continuing this bullish market structure. So, yeah, you basically use the premium and discount after you identify a swing range. Right, so you just place this tool on there, and then based on where
[05:52] price is currently at, you can determine the best course of action. So, if price is in a premium pricing, you ideally should look for shorts. If price is should look for longs. This is how you do it on a uptrend,
[06:05] right? On a bullish market structure. Now, let's look at a bearish market structure. Okay, so apply the same principles right down, pulls back, and then goes down creating a bearish break of structure.
[06:19] swing low. So, in this case, we can just use our premium and discount tool once again, right? Drag it from the swing high to you do it can do it from the swing low to the swing high, or the swing high to
[06:32] the swing low. Doesn't matter. And then you put it all the way up there, and this is where we know that if price is above the 50% level, we should look for shorts. Price is within the 50 below the 50% level, then ideally we should not
[06:45] just too early. So, in this case, what I've done is that I've combined supply and demand zones with the premium and discount concept. So, this is the swing low that led to the break I mean, this is a swing high
[06:59] using supply and demand, we know that this is the origin point of this imbalance move to the downside. So, that is where we can mark up a supply zone right there. So, in this case, ideally,
[07:13] I want to wait for price to come back up to a supply zone that is within premium which means that if I see the same supply zone or another different supply zone happen somewhere within a discount pricing, just like this, it might be a
[07:27] little bit too early to look for shorts, because there's more room for price to pull back since price is still within the discount territory. So, in this case, I'm much better off just ignoring the supply zone within the
[07:39] high chance that it's going to fail, and just waiting for price to come up to my supply zone that is within the premium pricing, within the premium range, then I look for shorts. Okay, so TLDR, bullish market structure,
[07:54] wait for price to enter discount zone before buying. Wait for price to come and mitigate a demand zone that is within the discount range, then look for Bearish market structure, wait for price to enter premium zone before selling.
[08:08] Wait for price to come up and mitigate a supply zone within the premium range, then look for shorts. So, yeah, that's the theory for premium super duper simple. I don't think
[08:22] think you can like master this with like five brain cells or something. So, yeah, it's very simple. Now, let's try to apply these onto the charts. Once again, just to reinforce your understanding of this concept itself. So, let me just
[08:36] remove all these drawings right here, and let's just go to like a random point in time. Okay, so let's just go bar replay and just go to like, you know, like let's say like right here. Okay? So, in this case, the first thing
[08:49] you want to do when you are trying to use this premium and discount concept is to determine when or where to place the tool. Okay, how do you know where to place the tool? Do you just place it right here? No. You want
[09:01] to find a swing range in which you plan to use this tool on. and identify structure, right? So, in this case, I see that price is obviously bullish. How do I know that? I know that because price has just created higher
[09:15] highs, higher lows, higher highs, higher lows, and another higher high. So, this is where we can identify my bullish break of structure right here. And then with that in place, I know that the lowest point that led to the bullish
[09:27] break of structure, this is my swing low, so I can just map that out as my swing low right there. It's also a strong low since we're in a uptrend. And strong low since we're in a uptrend. And then this is my swing high, right? So,
[09:40] this is a weak high since we're in uptrend. So, we're expecting price to pretty much goes up, pulls back, goes up, pulls back create like a new higher low somewhere around here, and then continue going up,
[09:52] continuing the higher high and higher low dynamic because we are in a bullish And remember like what I mentioned earlier on, in a bullish market structure, you want to wait for price to enter discount zone
[10:05] before buying. Okay, so going back here, we have identified a swing high and a swing low, which is the first step. The second step is to drag the Fibonacci tool or the premium and discount tool from the swing low to the swing high.
[10:18] Right, so in this case, take my premium and discount tool right here, drag it just like this. Okay, so just by doing this alone, we know where exactly price is in right now. Okay, so this is where, like I
[10:32] mentioned, above the equilibrium level, this is your premium pricing. Below the pricing. And right now, look at where price is at. Price is somewhere at the 50% level.
[10:46] If we go back a few minutes before it, where price is at right now, you will see that this is very high up within the premium pricing itself. Which means that if today I want
[10:59] to look for longs to trade in continuation with this higher time frame I should not be looking for longs right here. Because we are still quite high up within the premium pricing, and we could
[11:11] literally just be at the start of the pullback itself. Okay, that means potentially drop into the discount pricing, and then once it does, then we can potentially look for longs to trade that new higher low.
[11:25] counter trend, right, if you want to actually take advantage of the price look for shorts. Right, look for shorts to play the pullback to the downside.
[11:37] shorts is obviously at the start of the pullback, and also when price is within the premium range, above the 50% level right here. shorts, right, you can short it down, right, but
[11:52] understand that once price gets down into discount range, at any given moment, you could just shift bullish and price could just continue going up. Any moment, right, because this is where institutions are deeming price as cheap,
[12:06] so as a result, they're going to start looking for longs anytime right here. So now, let's go one step even further to apply what we just learned in the previous lesson, which is the supply and demand zones. So in the uptrend, ideally
[12:18] I want to be buying at demand zones. Okay, so downtrend, sell at supply zones because I'm expecting uh price to hold at all of these lower highs because the sellers are in control. In the uptrend, I want to buy at demand zones because
[12:31] price is going to be respecting the previous higher low. So in this case, I'm looking at this range right here, and let me just go back a little bit to where price was just now, and this is where I can try to map out every demand
[12:43] here. I always start from the extreme, right, so this is the range. Price goes up, right, so this could be a very obvious right, so this could be a very obvious demand zone right here.
[12:57] over here. And then there's also another good oh supply and There's also another demand zone right here where price goes up, pulls back,
[13:12] and then goes up. Right, so this is another demand zone right here. And then there's another range right here, right, you see price consolidate a little bit be another range. And then if I want to be even more precise, I can also draw
[13:26] demand zone right here where price went up, pulls back, and then goes up. So in this case, notice how we have four demand zones on the screen right here. Okay, looks a little bit messy right now, but there's
[13:39] around four demand zones. And this is all using the range method. If I were to use the pivot method, which is just to draw the demand zone using the reversal candle, the pivot candle, it'd be a lot more precise, something just like this,
[13:53] this, and also something like this. Right, it's a lot more precise just like Yeah, but anyways, there's four demand zones on the screen. And you might be wondering which demand zones should I enter for longs? Right, like which is
[14:07] the demand zone in which I should be actually entering buy orders at? Well, this is where you combine this new concept of premium and discount. Remember, when price is within that premium, you don't want to enter for
[14:21] longs, it's a little bit too premature. It is a little bit too early. So if that's the case, that automatically disqualifies this demand zone that is within the premium pricing, which is above the 50% level. So we can expect
[14:33] that demand zone to fail. And sure as hell, price did blast right see price blast right through the demand zone, bang, disqualified, gone. is within the discount pricing, right? So
[14:50] here's a pro tip for you guys. The more extreme the zone is within the The more extreme the zone is within the range, the higher the probability. The higher the chance it's going to hold. What I basically mean by that is
[15:04] that this zone right here is the extreme zone, which is situated at the extreme swing low, is going to be much more high probability than like this low right here. I mean that this zone right here.
[15:17] Reason being, if you think back about market structure, which basically states that the previous low has to hold in order for price to remain bullish. know that when price comes down to this extreme demand zone, it has to hold. It
[15:32] must hold in order for the bullish market structure to remain intact. Right, in order for price to just continue going up. So using that logic, the extreme zone is usually the most high probability.
[15:46] So in this case, this zone is much more high probability than this zone, and than this zone. Because it's more further and deeper into the discount that there's a higher chance for this zone to work out compared to this zone
[16:00] And sure, exactly just like what we thought, price came down to this demand zone, blast right through it. Okay, blast right the discount range. And then down price came down, blast
[16:13] right through this one as well, and then it came down to the extreme zone, the So I'm not going to talk about entries and exits because it's still way too going to talk more about entries and exits later on. But for now, just
[16:26] understand that this is how you should be applying the premium and discount. In a bullish example like just like this, you want to find the low, the high, put the premium and discount tool, wait for price to come below the 50% equilibrium
[16:40] level, get into the discount pricing, mitigate some form of demand zone, then look for confirmation, then look for longs, and trade the upside. once again, let's just see what price does next.
[16:54] respected this zone, here a little bit, right, starts consolidating around here starts going up, and boom, going up there, and breaks structure, right, so
[17:08] it's going up there, creating another bullish break of structure to the upside right after it has mitigated our extreme zone that is within the discount Now over here, there's some form of like liquidity sweep, which is a concept that
[17:20] we're going to delve deeper later on, but you can see, in this case, this demand zone failed. This demand zone failed. Price gravitated towards the extreme demand zone because it's situated at the strong low,
[17:34] and it's also at the end of the discount range. So that's a bearish example. Now let me try to show you like uh No, that's a bullish example. Now let me try to show you like a bearish example.
[17:47] So once again, you can apply this concept across every single time frame. 15-minute time frame. Now let me try to do it on the 5-minute time frame for you Okay, so using this example right here, price is bearish, lower highs, lower
[18:00] lows, lower highs, lower lows. Right, so this is the most recent bearish break of structure, so I can just map that up. Which means that this is our swing high.
[18:12] Which means that this is our swing high. And then this is our swing low. And then this is our swing low. Okay, so now, what you can do is to map out your premium and discount, right, so that's the most obvious next
[18:24] step. Okay, so after you determine the trend direction, which is bearish, and you want to identify your swing range, swing high, swing low. Once that's done, take out your fib retracement tool, drag it from the swing high to the swing low
[18:38] just like this, and bam, you got your premium and discount. So now, in a downtrend, we want to look for shorts when price is at the premium range. Okay, so I don't want to look for longs
[18:50] right here because this is where price is cheap. It's considered as a discount. So if I enter for shorts right here, it's a little bit too early. Okay, because there's more room for price to come up to within this premium pricing,
[19:02] and then start reversing and head back down. So in this case, let's just continue to see what price does, but before we do, let's say I want to look for shorts at using this trade idea here, where should
[19:15] I be looking for shorts? Ideally at some form of supply zone. Right, so once again, let's draw the supply zone. Okay, so always go from the extreme, this is the extreme supply zone. Right, this is the pivot candle that led to this huge
[19:27] there. And then there's another supply zone right here where price comes down, make a drastic pullback, and then goes down even further. And then another one right here. Let's
[19:40] refine it using the pivot candle, just like this. Just like this. Okay, so now there's one, two, three, three supply zones right here. Just nice, all of them is within the premium pricing itself.
[19:54] zone is, the higher the probability, the higher the chance of it actually working out. Right? The more likely price is going to respect it. So if I'm judging these three zones right here, this zone right here, it has to hold in
[20:09] Right? Because that is literally where the last lower high is situated at. If price comes up there and take out the last lower high, this is where we have your market shift, which means then the trend direction is about to shift shift
[20:22] from bearish to bullish and right now the buyers are in control of price. what happens next. Okay, so price mitigated this um second extreme. As you see that it consolidated a little
[20:37] just continue to see what price does, continue to observe what price does. Okay, it seems like it's stuck in this consolidation here and nothing is happening whatsoever. Okay, cool.
[20:50] So in this case, what happened was that price came up there, mitigate this supply, right? Blast right through the supply because concept that we're going to delve deeper into.
[21:02] And I came up here, mitigate this supply zone right here and then reversed and here. All right. So in this case, this supply lot of sell orders that were situated at this area causing price to actually
[21:17] to look for shorts somewhere around here, you could have caught this little Right? But once again, going to delve deeper into entries and exits later on. So yeah, that's pretty much the premium and discount, right?
[21:32] Demand zone in discount, strong buying area. Supply zone in premium, strong selling area. Demand zone in premium, right? So let's say like this demand zone right here.
[21:46] right through it. Or supply zone in um discount, low quality. Price is most likely going to blast through it. So you want to remember that the best zones, they are not just good zones.
[22:01] They are good zones that are located in the right part of the range. They are the demand zones that is within the discount range. They are the supply the discount range. They are the supply zones that is within the premium range.
[22:14] Okay? So that's how you use premium and discount, right? I think this is a very simple concept, so I don't want to like waste too much time on this. You can just apply this across all time frames, across all different market and
[22:27] asset classes and you will always be able to like just easily find a trade ideal once you start to really like combine these with supply and demand zones and market structure. So once again, to keep things simple,
[22:40] understand the value within a range, right? Whether it's actually worth it to actually look for shorts right now or is it too early? Or is it too late? Right? When is the perfect time? In a bullish condition, you want to buy
[22:54] in discount. In a bearish condition, you want to sell at premium. And once again, this is just one piece of the puzzle. You need to combine it with supply and demand zones, market structure and later
[23:07] on liquidity concepts, all of this stuff. When you do, this is where you can start entering trades with sniper-like position. All right? So yeah, I hope this got this concept has like really helped you guys
[23:20] you know, like get a little bit better understanding of how to analyze a blank chart, right? Because as traders, we want to make use of as many tools as humanly possible in our arsenal to just help us develop our trade ideal. To just
[23:33] help us determine our trade bias whether to look for longs and look for shorts. And honest to God, like this is one of my favorite tools to use of all time because it's so simple and most importantly, it is so effective.
[23:47] Like yes, 80% of the time, yes, like always it has never failed me, right? Basically like maybe only 20% of time it actually fails me, but like most of the time it works and it works ridiculously well. So yeah, just use this.
[24:01] Uh it doesn't just apply for swing range, you can also try to use it on to use it on the higher time frame, lower time frame. It's just like the context in which you're applying it will determine like
[24:14] what are the answer you can get from it, right? if you use the premium and discount on the daily time frame itself, potentially tell you where price is going to move towards over the next few
[24:28] Compared to if you use the same tool on the 5-minute time frame, it can tell you where price is at right now and where price is most likely going to go within the next few minutes. Right? So it's like you can use this concept across all
[24:42] time frames. Just make sure that you are tailoring tailoring it and just make sure that you are managing your expectation when premium and discount on the daily time frame while you're entering the trade on
[24:55] like the 5-minute time frame. Right? Like it just doesn't line up. You can't expect that, oh wait, price is within the premium pricing right now, so I'm here. No, that's just not how it works, right? So you want to combine your
[25:08] multi-time frame concepts, you want to combine the market structure, additional confluence as to just build your trade ideal so that you have more evidence to back up your trade ideal so you can have more conviction holding the trade
[25:23] Okay? So with that being said, I look forward to seeing you guys in the next lesson. Cheers. As always, remember you're just one trade away.