Premium and discount in gold trading

Premium and discount describe where price sits inside a defined swing, the dealing range. The 50% level of the range is equilibrium. Above it price is at a premium, where ICT-style traders look only for shorts; below it is a discount, where they look only for longs. The framework comes from the idea that smart money buys below fair value and sells above it, and it is implemented with a Fibonacci tool drawn across the swing.

How it applies to gold trading

Suppose the current 4-hour dealing range on gold runs from a low of 3,940 to a high of 4,040. Equilibrium is 3,990. A bullish order block at 4,010 is in premium and is skipped by a trader following the rule; a bullish order block at 3,965 is in discount and qualifies. The rule filters out the pullback entries that are closest to the top of the move, which are the ones most exposed to a reversal. Within the discount zone, the 62% to 79% retracement (the OTE) is the preferred entry area.

The dealing range must be chosen on the timeframe that matches the trade. A 5-minute range inside a daily premium can still be in discount on its own terms, which is why multi-timeframe reading matters.

A common mistake

Treating equilibrium as a target or a hard line. It is a dividing line for bias; price often trades through it without reacting.

See also: OTE, Dealing range, Fibonacci retracement, Order block.

Frequently asked questions