Premium, discount & OTE

Buy in the lower half of a range, sell in the upper half.

Draw a dealing range from a swing low to a swing high. Above its 50% level, equilibrium, price is at a premium; below it, at a discount. ICT buys in discount and sells in premium, and refines entries with the optimal trade entry zone, the 62% to 79% retracement.

Illustration drawn by Propbook, not a real chart.

How to spot it

1
Pick the most recent clear swing low and swing high on your bias timeframe.
2
Draw a Fibonacci from one to the other and mark 50%.
3
In an uptrend, wait for the retracement into 62–79% (70.5% is the sweet spot) before looking for an entry.

On a prop firm account

Entering in discount for a long keeps the distance to your invalidation short, which means more contracts for the same risk, or the same contracts for less of your drawdown.

Position size

Watch ICT explain it

Your notes

Videos load from youtube-nocookie.com only when you press play. © Inner Circle Trader

Related concepts

Order block

The last opposite candle before price displaced and broke structure.

Daily bias

Decide where price is going today before you look for an entry.

Fair value gap (FVG)

Three candles, one gap: the imbalance price comes back to fill.

All videos are by Michael J. Huddleston, the Inner Circle Trader, and play from his YouTube channel. Propbook is not affiliated with ICT; this is an independent index.