Premium, Discount and Equilibrium: The ICT Dealing Range
In ICT’s framework, a dealing range is the range between a defined swing low and swing high. Its 50% level is equilibrium; the upper half is premium and the lower half is discount. The rule of thumb is to look for buys in discount and sells in premium, in the direction of the higher-timeframe bias.
Intermediate · 9 min read · Updated
What you will learn
Draw a dealing range, find its equilibrium and decide whether a setup sits in premium or discount.
Read first: Market Structure in ICT: Swing Highs, Swing Lows and Breaks of Structure
Drawing the dealing range
Choose the swing low and swing high of the leg you are trading, on the timeframe that defines your bias. Draw a Fibonacci tool from one to the other with three levels: 0, 0.5 and 1. The 0.5 level is equilibrium. Everything above it is premium, everything below is discount.
Hypothetical example · Locating equilibrium
The range runs from 100.00 to 110.60. Equilibrium is (100.00 + 110.60) / 2 = 105.30. A pullback to 104.40 is in discount; a rally to 108.00 is in premium.
Why it matters
Buying in discount means buying the lower half of the current range: the stop below the range low is closer, and the distance to the range high is larger. The logic improves the ratio between potential gain and risk; it does not make the trade more likely to win on its own. In a bearish context the same logic applies upside down: sell in premium.
Which range to use
- Use the range of the leg that matches your holding period: a daily range for a swing trade, an intraday range for a day trade.
- Redraw the range when price breaks beyond it; a broken range is no longer the reference.
- Nested ranges are normal: a setup can be in discount on the 1-hour range and in premium on the daily one. Decide in advance which range has priority.
Combining with entry zones
A fair value gap or an order block that sits in discount, inside a bullish context, is a classic ICT long area. The deepest part of discount, between roughly 62% and 79% of the leg, is the optimal trade entry zone covered in the next lesson.
Two timeframes, one decision
Ranges are nested, so the same price can be cheap on one timeframe and expensive on another. Decide which one leads before the session.
Hypothetical example · Daily and hourly ranges
The daily range runs from 18,000 to 18,600, so its equilibrium is 18,300. The 1-hour range of the current leg runs from 18,350 to 18,550, with equilibrium at 18,450. Price pulls back to 18,420. On the hourly range it is in discount (below 18,450); on the daily range it is in premium (above 18,300). A trader whose plan says “the daily range leads” would not buy there and would wait for prices below 18,300; a trader whose plan says “the hourly range leads, inside a bullish daily bias” could look for a long.
ICT also uses the New York midnight opening price as a daily reference: above it, price is considered in premium for the day; below it, in discount. It is another way to answer the same question with a level that every trader can find.
What premium and discount do not tell you
- Not timing: price can stay in premium for days in a strong uptrend. Discount tells you where a buy is cheaper, not when price will turn.
- Not direction: the bias comes from structure and the draw on liquidity; premium and discount only refine where to act on it.
- Not value: “discount” is relative to a range you chose, not a statement about the fair price of the asset.
Used alone, the 50% line is just the middle of two numbers. Its value comes from combining it with a structure shift, an entry pattern such as a fair value gap, and a defined stop.
Common mistakes
- Drawing the range between arbitrary points instead of confirmed swings.
- Buying in discount against a bearish higher-timeframe bias.
- Forgetting to update the range after it breaks.
Practice exercise
On a 1-hour chart, draw the dealing range of the last clear leg and mark equilibrium. Over the next sessions, note every fair value gap and order block that forms in discount and in premium, and record which side your bias favoured.
Check your understanding
1. What is equilibrium in a dealing range?
- The 50% level
- The range high
- The opening price
Show the answer
Answer: The 50% level. Equilibrium is the midpoint of the range.
2. In a bullish context, where does ICT look for buys?
- In premium
- In discount
- Exactly at the range high
Show the answer
Answer: In discount. Buying in discount gives a closer stop and more room to the high.
3. What does buying in discount improve?
- The certainty of winning
- The ratio between potential gain and risk
- The commission paid
Show the answer
Answer: The ratio between potential gain and risk. It improves the reward-to-risk ratio, not the probability by itself.
Practise with the free tools
Frequently asked questions
Is premium and discount the same as overbought and oversold?
No. Overbought and oversold come from oscillators. Premium and discount are positions inside a price range you define.
Do I need a Fibonacci tool?
It is the simplest way to draw the 50% level, but you can calculate the midpoint by hand: (high + low) / 2.
Which timeframe should define the range?
The one that matches your holding period. Write it in your plan so that you do not switch ranges during a trade.
Related lessons
References and further reading
- The Inner Circle Trader — official YouTube channel — Michael J. Huddleston
- E-mini Nasdaq-100 futures contract specifications — CME Group
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