ICT FOR DUMMIES | Premium and Discount EP. 8 transcript

Welcome to ICT for Dummies episode 8. Premium and discount. Buy low and sell [Music] high. Yeah. Keep shorting there at the premium. I'm keeping at the discount cuz this is buying low sell she will get you rights liquidity and rebalance ranges. That's how you trade this with the premium and discount. You will maybe probably get laid. What? That's a crazy last one. Hey, it's true, bro. All right, everyone. So, today for this video, we're going to be going over premium and discount.

We're going be going over what these ranges actually mean. I'm sure you've heard the term used a lot inside of a premium range or inside of a discount range. So, we'll get into how you can actually use them. It might be a little bit confusing because there's gonna be a lot of different ranges, but we're going to get into some examples and again show you how to actually use them. The first step is whipping out your fib retracement tool.

This is going to be your best friend when it comes to marking out premium and discount. Blake, show them what that looks like. Oh, they actually did bring my your nut sack ointment. My nutsack ointment is here. Be right back. So, first things first, guys, I just want to explain to you guys why this is actually important. premium discount and just give you an analogy for like real life. For example, when you're at the store and you want to buy something, right, you want to buy it in at a discount for example, right, for PB Premium, you want to be getting in on those sales, right?

When we have 25% off for National Women's Day for, you know, celebrating Patrick, right? So, we want to be getting in during times like that. You do not want to be getting in at a premium when prices are, you know, inflated or, you know, when prices are raised. No, no, no. Don't don't join the Discord at a discount. That's when we get all you damn brain rodders who who just don't even care to learn. All you care about is just some like some of you guys just like sometimes just freaking join the Discord and like you just like signal signal and you don't like really even care about like my feelings.

Like I'm there to teach you, bro. Like real I just I just want to like change your life and stuff and like all you care about is like, "Yo, VB, like when's like the next discount?" Like not not everything's like about a discount. Like they always ask when the next signal is coming out. They never how's the signal type How's the signaler doing? I mean again guys, for example, like you're in the store, you want to be buying eggs when they're on a discount, not when it's premium, not when the prices are inflated.

That's essentially the whole reasoning behind premium and discount, right? You want to be getting in on the market at a good price. So with this lesson, we're really going to show you how to utilize the Fibonacci tool as effectively as possible. And what this is going to do is going to optimize your entries. If you're longing from a premium or you're shorting from a discount, it's not going to be as optimal as if you're longing from the discount or shorting from the premium.

So, let's show you guys where actually premium and discount lies. So, for example, in this trading leg, we have a very obvious impulsive swing high and a swing low. And let's say in this scenario that we are bearish and we're going to be drawing out our fib tool from the swing high all the way down here towards this swing low. Now, really quick, if you guys want to just look at the fib retracement, I just have 0.5 here and one.

Now if I want to be shorting, I want to see price trade into equilibrium of this range. This is called equilibrium. The 0.5 is called equilibrium in this bearish scenario. Anything here is considered discount. Anything here is considered premium. Right? So if we're shorting, we want to be in premium. Now, like we've said before, and we say this all the time, price is always doing one of two things. What is that? It is either seeking liquidity or rebalancing ranges.

So, like Blake mentioned, when you do have these super impulsive moves, for example, this very strong bearish order flow that leaves little to no retracement. If you want to short, you at least want to see a rebalance of this range before you take shorts lower. You want to be shorting from the premium of this range. You want to be shorting once equilibrium has been hit and that range has been rebalanced. And the main point of premium and discount, guys, all comes down to risk-to-reward.

So if I bring out my risk-to-reward tool, you can see here at exactly equilibrium, this will give me a 1:1 risk-to-reward from the buy side liquidity to the sell side liquidity. And as we get deeper into the premium of this range, the better my risk-to-reward will be. And as you see, as we keep going deeper into this range, the better my risk-to-reward becomes. So this is going to be really helpful for you guys to actually get better risk-to-reward on your trades because you do not want to be shorting for example here when price hasn't even reached equilibrium of this range because your risk-to-reward will be negative and that is not good.

So now we can mark out this bullish leg bottom to top and as you can see here we now have the premium and the discount marked out. Right? So if we want to take longs ideally this is not the area we want to be longing in. Why? Because we are very premium right now. you would want to see price rebalance this range which means at least trade up until equilibrium and now this imbalance has been corrected and now longs are going to be far more optimal and you're going to get better risk-reward because we are discounted now so obviously if you're longing near equilibrium you're going to get at least a one one back to this high and like Blake said you know the deeper you go into this range into the discount for longs the better that your risktore reward is going to be I will say it a million times all these concepts and everything we teach you, you don't just use them individually.

You pair them with everything else we've taught you. But this is very important to know because this is going to optimize your entries. It's going to optimize your RR. It's going to help you avoid getting stop rated and it's going to allow you to achieve more consistent trading results. So, let's pair this with something like fair value gaps, right? If we want to be longing a fair value gap of this bullish leg, ideally we wouldn't want to long the one that's premium all the way here because we're obviously not going to get good riskreward.

And chances are that price won't reject this premium bullish for value gap like it will reject this discounted bullish or value gap. Why is that? Because if you're going to be longing this fair value gap up here, this range has still yet to be rebalanced. Ideally, you'd want to wait for the range to get rebalanced. If you're going to enter off a fair value gap, you'd want it to be the discounted one if you're going to enter long.

This is going to have a way higher probability of actually being respected and then trading to the desired levels. Now again guys, this might get a little bit confusing because obviously there's going to be ranges inside of ranges. For example, here we have this dealing range that we just had, but then also once this swing gets made, we're going to be having another dealing range right here. So, we're going to get into some examples on how to actually draw out your ranges correctly so you don't just get lost because this is a very confusing ICT concept that I feel like a lot of people get mixed up with like where do I draw our ranges?

But we're going to go into some examples right now to hopefully clear things up. So, again guys, with this concept, you want to be utilizing it with other confluences, right? So, as we talked about in our liquidity video, right, we had a sweep here of this liquidity right here. Nice little sellside sweep. What do we notice? We got above guys some nice buyside liquidity. We have buy side liquidity resting here and we also have that low resistance liquidity as a liquidity pool.

So obviously once we've identified that we have that sellside sweep on the higher time frame and we swept that 15-minute low. Now we have this impulse leg on the one minute time frame, right? We clearly have very strong bullish reaction here after that sellside sweep. And now we can mark out this range top to bottom. Right? So here we have equilibrium resting which is going to be the 0.5. So, ideally, I'd want to be longing from a retracement into at least equilibrium.

But something I do want to say is that we don't necessarily need to be in the trade at discount. As long as we know that this range has been rebalanced, we should be okay to be longing. So, if you're feeling confident enough with price where you're telling yourself, okay, this range has been rebalanced. I have all the bullish confluence I need to be longing and we're in this discount. This range has gotten rebalanced as well.

You know, this is looking good for longs. I'll enter off here. But sometimes you might want to wait for a little bit of structure. So, you'll probably wait for a reaction off of equilibrium and maybe once you get that reaction, you're like, "Okay, I'll take longs from here, stop loss at this swing low, and then I'll target all this." Right? So, what I'm trying to get at here is you don't necessarily need to be in the trade at discount, but you do want to see that range get rebalanced before you enter long.

But before price truly enters bullish order flow, you're going to notice that it's going to want to rebalance this range, which you can see right here. It taps into equilibrium. It hits this discounted fair value gap. And then what happens after we get that delivery higher, right? And we go ahead and run all these levels that we have marked out. So this is why understanding how to use this fib retracement tool is really important because if you are able to mark out premiums and discounts of legs, then you're going to optimize your entry.

But before we even go about executing on the lower time frame, we also still want to be analyzing if these ranges are being rebalanced on the higher time frame. So right now we're on the five-minute chart. We were previously on the one minute chart. If we mark out this leg right here on the five-minute chart, you can clearly see that price goes ahead, trades higher really impulsively, and then before it continues higher and breaks this high once again, what do we get?

We get that rebalance to equilibrium. Why is this important? Because the same things that you want to see on the lower time frame, you want to see on the higher time frame. Same things you want to see on the higher time frame, you want to see on the lower time frame. It's all fractal. You want to be able to apply it across all time frames. So, if you're seeing a range get rebalanced in the higher time frame, what's it going to help you do?

It's going to help you determine your bias. It's going to help you go about your next draw on liquidity. And you can see this is literally constantly happening. We get this strong move up, price rebalances, hits equilibrium, goes up higher. What do we get here? Price moves up, rebounds this range, goes up higher. Do you get what I'm trying to say? Now, there's always going to be a stronger reaction when price is rebalancing these ranges and tapping into these significant period rays.

So, hopefully you guys see what I'm trying to get at here, right? Price usually needs to rebalance these ranges before it can continue in the direction that it wants to. So now that we know that the higher time frame leg is rebalanced, we don't really have to worry about price trading lower here. We just want to pair these exact same confluences on the lower time frame so we can execute properly. So we know the higher time frame got rebalanced, right?

We trade into equilibrium. And then we also get that trade back into equilibrium here. And everything is aligning. We're clearly seeing that every time we have a leg up, price goes back, rebalances that range, and then gets a reaction. And we know from here we are ready for longs, baby. Yeah. And with this guys also is that ranges are always expanding, right? So every time we take out a new swing, your range is constantly expanding.

So for example, here we have this swing low and then this major swing high point. And what you should be looking for underneath equilibrium of this range is liquidity pools or fair value gaps. And in this scenario here, we have both. We have this liquidity pool being the sellside liquidity and then we have this bullish fair value gap. And that's how we were able to come to that conclusion of that bullish bias on the higher time frame because we expanded this range and we saw that price traded below equilibrium of this range and then we got our lower time frame entry.

Now we're going to get into a bearish example of premium discount. Good one. All right guys, so right here we have a very strong impulsive down move and this was probably from news, right? So we can mark out the swing high. This is our swing high and then this is our swing low. And this does go lower and as I was saying ranges are always expanding. So you just draw it out a little bit lower. For now, now that that swing low is put in place, we want to see price trade into premium of this range before entering into any sort of shorts, right?

We want to see price get rebalanced and then we want to see that lower time frame confirmation get out of this to then enter a short. So, I'm going to go down now to the fiveminute. So, as you guys can see here, we have this bearish fiveminute for value gap sitting at equilibrium of this range, right? So, I want to see this get traded to before entering into a short. You do not want to be shorting, you know, when we're down here before hitting equilibrium, right? because there's still room for price to move.

We still need price to trade into equilibrium. Orders are getting filled here, right? Nobody in the market is entering at this low into discount, right? So once price trades into this 5minute fer gap, I'm then going to look for that lower time frame structure to get confirmation that we're going to go lower towards this sellside liquidity down here. And from here, price ends up trading back down towards this sellside liquidity as you can see.

And I want you guys to note also to not be marking out every single range that you guys see, right? For example, here in this scenario, if I'm going to be bearish, right, and I'm looking for shorts down towards this sellside liquidity, I'm not going to be marking out, you know, impulse legs from here to here, right? Because that's not what I'm looking to see price get traded into. I'm not looking for longs, right? I'm looking for shorts.

So, all I'm caring about is this impulse leg here. And then if I'm going to be dropping down to the lower time frame, right, I'm going to be looking for those impulse legs on the lower time frame. So, we're going to get into a couple more examples now, guys, just to instill this into your brain. So here we've identified another super strong impulsive leg down right we have this very very blatantly voluous juicy ginormous freaking hey yo okay we know that now since there's a huge imbalance in price it most likely needs to be corrected if it is going to sell off again right but like we said before ranges can be confusing and just because we hit equilibrium of this doesn't mean that order flow has to flip completely bearish we can always continue to analyze the ranges as we go to see where price truly wants to go so if If we play this out, we see that price trades up until equilibrium.

And naturally, we do get a reaction. But instead of expanding lower, we can see that price actually ends up respecting this newly formed range and continues higher. And notice what price keeps doing, right? If we continue focusing on these new ranges and these new impulse legs being created, which are now towards the upside and we keep marking them out, what do we realize? Well, we notice that price will continue rebalancing these and then expanding higher.

So, we do have a flip in order flow here. This range itself is getting ran through but at first we did get a reaction from the equilibrium. However, with these new ranges being formed, we are now getting reactions to the upside and these bullish ranges are getting rebalanced and continuing to expand higher. And this happens nearly all the time, right? Sometimes it's not perfect, but for the most part, you are getting these rebalances pretty frequently before price continues to expand higher.

So yeah, guys, I know this might seem like a little bit confusing now, but guys, trust me, once you start adding this with all of your other confluence like we've taught you, like liquidity sweeps, like for value gaps, right? We're going to get into daily bias and all of that later on, but you guys will slowly start piecing together all these concepts that we teach you and it will make a lot more sense later on. So if we use something like the fib tool and premiums and discounts and just a simple understanding that ranges naturally need to get rebalanced almost all the time to continue in the corresponding direction then you can use that to help you determine something like your bias.

Right? So let's say we mark out this leg top to bottom. We have this really strong leg, this impulsive bearish leg and we're trading AM session. Then we're most likely thinking that for AM session we'd want to see price rebalance this range. So maybe during AM session we're going to be looking for longs. we're gonna have a bullish bias because we know there's a huge imbalance in this leg and it most likely needs to be corrected.

You can mark something out like this hourly bearish for a value gap. You can anticipate, okay, going into this morning, I probably want to see if I can catch some longs, maybe trade up into this hourly bearish for value gap that's sitting at the premium of the range. And so, obviously, you can see during AM session, that's exactly what you get. Price goes ahead, rebalances this range. And now if you're trading PM session, you can use that higher time frame analysis with premiums and discounts to also determine your next bias and your next draw liquidity.

So now you know, okay, we're sitting inside this hourly bearish for value gap. It's PM session now. This range has already been rebalanced. Do I really want to keep looking for longs? Most likely not. And you can see that PM session goes ahead and has a strong reaction down because we rebalance this range. So this is like very vaguely just showing you how you can use this to help determine your bias. simply analyzing where these imbalances in price are lying, whether we are trading in the premium or discount.

And this will help you get a more accurate narrative of price in general. So, we can almost piece this in like three parts, right? You have like your higher time frame leg. We have this really strong bullish leg. If we're going to be bullish going into the morning and we want to make sure this range is rebalanced. Awesome. We know that we have this higher time frame leg being rebalanced. Let's consider the green zone to be like the hourly time frame, maybe the 1 hour, the 4 hour. we know that this higher time frame like has gotten rebalanced and we know that we're getting a reaction from it.

So then if we're like looking at relatively lower time frames like the 15minut let's make this like orange then this is most likely the current trading range that we're in of the session and we'd also want to see this get rebalanced and this get respected if we want to have more confirmation for a bullish bias. So we sort of start off on the higher time frame and we drop down and continue receiving that confirmation from price action.

We know that this higher time frame hourly leg has gotten rebalanced and respected. We get a reaction. Now, if we're looking at like a 15 minute chart, we know that this range has also gotten rebalanced and respected. And now, if we go down all the way to like where we're executing, which is mainly going to be on the one to five minute time frame with the way Blake and I trade, we'll mark this out as yellow. Then, we can get our final confirmation to see if these lower lower time frame ranges are also getting rebalanced.

You know, we're probably looking for an entry now. So, we'll have like a bullish for value gap sitting right here and we want to see, you know, maybe this range get rebalanced, trade into a bullish or value gap, respect that and from there we're locked in for longs and we can anticipate that price will run higher. So, I know this looks pretty sloppy and it's like all jumbled up together, but you get what I'm trying to say, right?

You always want to keep dropping down into the time frames, making sure that everything is truly being respected and building up that confirmation. And the more confirmation you can build across each time frame, the higher probability that your trade is going to play out. Okay, guys. So, going off what Patrick just said, I'm going to be pairing everything together in an example right here on the chart. So, on the higher time frame, I'm bullish.

So, I'm going to be marking out this swing low here to this swing high, right? And underneath that, what do we see? We have a bullish fair value gap here on the hourly time frame. So for me to be taking longs, what I want to see price do is for price to trade back into this bullish for valley gap, get some reaction out of that, maybe form that lower time frame confirmation, and then we can get some longs out of there to target this buy side liquidity.

So now I'm going to drop down into the 15-minut time frame and I'm going to wait for this fair value gap to get traded into. So once this fair value gap gets traded into and we respect it, I'm now on the 15-minut time frame. I'm going to wait for that structure to then validate this bias. I'm going to go down now to this 5minute time frame to see if we can actually get an entry and if we can get some reaction off of this level.

So now I'm going to whip out this fib. I'm going to go from the swing low to the swing high and I'm going to wait for price to trade into equilibrium into this fair value gap to then get a trade idea off this. Keep expanding this range here. Keep expanding this. Now that the swing high is put into place. I'm looking to see price trade below equilibrium of this range. And what do we see here? Well, we have sellside liquidity resting right here as well as we have this bullish fal gap right here in discount.

So I want to see price then trade lower into this fali gap sweeping out the sellside liquidity and then getting a long towards this buy side liquidity above us. So then price ends up sweeping out this low trading into this bullish for rally gap. We get a reaction off this and here I can enter longs with a stop loss at this swing TP at this high for example and maybe you can even leave runners for that buy side liquidity on the hourly time frame and then we can play out price here and it ends up smacking all of these take profits.

So you want to be marking out your Fibonacci guys for everything on the daily time frame, on the hourly, right? To really get a sense of where your bias is. And then for your actual entry point, it's going to be really, really helpful in getting that risk-to-reward, right? Because the Fibonacci and equilibrium and premium and discount, it's useful for those two reasons. One is for actual imbalances in price, right? The market likes to trade towards discount because that's where a lot of buyers are stepping in. and price likes to trade towards premium because that's where a lot of sellers are stepping in right so a lot of orders are getting filled at those areas and then for us for traders right we want to be using that as an actual entry point for risk-to-reward reasons so understanding the two reasons of why the fib tool and why premium discount is so helpful is going to help you guys a lot in just your overall trading yeah guys I mean that pretty much wraps up premium and discount I mean like you can really apply this to nearly everything in life so the way you should think about it is like if you pull up to a party and When you see a girl that you really like, it's almost like longing at a discount.

You want to start, you know, chopping it up with her, sort of getting in nice before that range gets rebalanced, before other people start talking, and it's going to allow you to get that optimal entry. Because if you wait like too late into the night, then chances are that range has already been rebalanced. Someone already talked to her, someone already got the reps in, and you just missed out on the greatest long opportunity of your life.

If you're not taking advice from us, you're probably never gonna be rich. No, I'm kidding. But seriously, thank you guys so much for watching ICT for Dummies episode 8, premium and discount using Fibonacci. Homework. Homework, guys, is going to be mark out your premium and discount ranges. Just go into the chart, look at the swing highs, look at the swing lows, mark out your buy side liquidity, mark out that sellside liquidity, and you know, just be marking out your overall ranges, seeing where price is going to trade towards.

Uh, last thing I do want to say, if you are looking for some mentoring from us, we do have applications open for our mentorship right now. Uh, you can apply through like our Instagram bio link. We'll probably toss it in. We'll toss it in the YouTube description. It is in the YouTube description. When you join our mentorship, if you are more on like the beginner side, we do give you like a whole 20 course video before we get into the live calls.

And those videos will essentially explain every single concept that you need. And then we'll get more into like model breakdown, bias, draw liquidity when the mentorship starts. And there's a lot of really fun, interactive, and just great community overall in this mentorship. So, if that's something you're interested in, apply. If that's not something you're interested in, keep watching this YouTube series. We're going to keep releasing banger videos.

We're going to explain really everything for free and give you all the sauce you need. But for those of you who do want, I guess, a little bit extra mentoring, some accountability, just overall cool community to learn with, then um link in description. Check that out. Make sure to subscribe, like, comment, tell me what concept you're looking forward to learning most. Drop that comment below. Much love, fellas. Peace out, boys.