Premium, discount and the dealing range
Split a defined swing range at 50%: above is 'premium', below is 'discount'. It is a location filter, not a valuation.
Interpretive framework. Smart Money Concepts is a discretionary way of labelling price action. Definitions vary among practitioners, and nothing here proves institutional orders or a guaranteed edge. All examples use synthetic numbers.
Defining the range
The dealing range is the span between a chosen swing low and swing high — usually the swing that produced the latest BOS. Its 50% level is called equilibrium.
In a bullish context, SMC practitioners prefer looking for long setups in the discount half (below 50%) and treat the premium half as where selling pressure is more likely. The reverse applies in bearish context.
Limits
Premium and discount here are purely geometric. They say nothing about the company's intrinsic value — a stock can be at 'discount' in its range and still be expensive on fundamentals.
The zones move whenever you redefine the range. Choose the range by rule (e.g. the swing that created the last BOS) to avoid drawing whatever supports your bias.
Worked example
Computing equilibrium (synthetic)
- Swing low 42.60, swing high 55.40 (the leg that caused a BOS).
- Range = 12.80. Equilibrium = 42.60 + 6.40 = 49.00.
- Discount: 42.60-49.00. Premium: 49.00-55.40.
- An unmitigated FVG at 47.2-48.4 sits in discount — more interesting to a bullish reader than one at 53.
Premium/discount is a location filter that combines with other evidence; it is never a reason on its own.
Common misconceptions
“Discount means cheap.”
It means lower half of an arbitrary chart range. Fundamental value is a separate question.
“Price always returns to equilibrium.”
Strong trends can stay in premium for a long time.
Checkpoint