12. Premium / Discount

12.1 P/D Usage

Community insight

• When trading a retracement, the reference EQ can be used as the take-profit target. — Garrett — "A Deeper Dive into SMT Divergence", 34:00

Premium / Discount should not be used mechanically.

Afyz rules:

• P/D should only be used during retracement PoP.
• P/D can be used to judge the probability of Universal Model key level + CiC reversal.
• P/D during expansion PoP can be used as an invalidation tool.
• SS confirmation is required.

12.2 Avoid

• Do not long in premium.
• Do not short in discount.
• You do not know whether price will retrace / reverse, or where it will happen.

Advanced P/D:

• one asset trades back into the range but remains in premium;
• another asset manipulates the opposite range edge;
• this often creates SS.

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12.3 Advanced Premium / Discount Sequence

Community insight

• In a retracement, the leading asset barely retraces, the middle asset retraces into its OTE, and the lagging asset doesn't retrace at all — it reverses off the opposite range extreme instead. That difference in retracement depth is itself a validation tool. — Afyz — "Advanced Premium/Discount Sequence" (Lecture 12), 3:44

During a retracement, the three assets in a triad typically retrace to different depths, and that difference is itself a validation tool:

• The leading asset retraces the least, staying high in the range (near the extreme, barely past the 25% level) — this shows the strongest willingness to continue.
• The middle asset retraces deeper, typically into the optimal trade entry / 50%+ area.
• The lagging asset does not retrace at all — instead of pulling back, it reverses off the opposite range extreme (the range low, for a bullish case), the weakest asset in the triad.
• Validate that the range low is really about to reverse — rather than continuing lower — by requiring a strength-switch SMT or strength-switch PSP on the lagging asset specifically: the asset trading lowest in its range should close back stronger, confirming institutional intent to reverse rather than continue.
• Once that strength switch confirms, trade the leading or middle asset towards their draw — avoid trading the lagging asset itself, since it is too deep in its range and its own reversal does not support a continuation to the same target.

12.4 Gap Filtering by Premium / Discount

Use two premium/discount ranges together to decide which continuation gaps are trustworthy:

• The current expanding candle’s own range (its low to its high as it forms): the stop loss / swing formation should sit in this candle’s discount, not its premium.
• The higher-timeframe dealing range the candle sits inside: below equilibrium of that range, any gap that forms is acceptable, since the market is still expanding away from a reversal. Above equilibrium — in premium of the higher-timeframe range — demand that the gap also sits in discount of the current candle’s own range before trusting it; otherwise a swing at the high of an already-premium range is not a relevant swing.

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