Premium & Discount Levels
Last updated
Last updated
What is this about: This talks about using a fib to find Premium & Discount zones.To understand Premium & Discount zones, let’s use a fib.
The fib is divided into 4 zones. A premium zone is the upper 25% (75% - 100%) of the fib and a discount zone is the bottom 25% (25% - 0%) of the fib.
The other area in the middle (25% - 75%) is fair pricing.
How this can be programmed: To find Premium zones, take the upper 25% of a range. To find Discount zones, take the bottom 25% of a range.
What is this about: This section talks about using ranges & Premium/Discount zones to take entries & exits. For a buy: look for a bullish structure break (the price has to close above the swing high). Then wait for the price to close inside the range and reach the discount zone. A candle low should be inside within the discount zone. You can buy there. Exit when the price reaches the bottom part of the premium zone or the topmost part of the premium zone.
If the price reaches the premium zone and goes even higher above the new range (without going down to the discount zone to give us an entry), that means that we have to wait for this new range to be confirmed. Our new range’s top will be the high that was broken, and the bottom will be the low that caused the move that broke the high. Wait for the price to close inside this new range for it to be confirmed. Then we have to wait for our buy signal again.
For a sell: look for a bearish structure break (the price has to close below the low). Then wait for the price to close inside the range and reach the premium zone. A candle high should be inside within the premium zone. You can sell there. Exit when the price reaches the topmost part of the discount zone or the bottom part of the discount zone.
If the price reaches the discount zone and goes even lower below the new range (without going up to the premium zone to give us an entry), that means that we have to wait for this new range to be confirmed. Our new range’s bottom will be the low that was broken, and the top will be the high that caused the move that broke the low. Wait for the price to close inside this new range for it to be confirmed. Then we have to wait for our sell signal again.
