foreign [Music] how's it going everyone this video is going to be over discount and premium however for this video you have to have a good understanding of buy side and sell side liquidity so if you haven't already watched my video on that it will be linked in the top right corner so the first thing to understand in marking out discount opinion is finding the range and so for that I look for a swing High to a swing low or essentially the most prominent range in this area and from there I will take in this case the gone box or afib and Mark out from the high to the low doing this we can see where our equilibrium rests right here with the 0.5 Fib so this would be the equilibrium of the range anything above the 0.5 FIB is considered at a premium and anything below the 0.5 FIB is considered at a discount so extending this box over to the left we can get a better visualization of where our premium and discount of the range lies it is important to note that there is not just one range within price section there are multiple ranges within ranges for example here we have this range from this move down however when we put in a swing low here and move back up we create another range from this high to this low there are multiple different ranges within a setup price section and it can get kind of confusing so we'll jump into some examples to explain that however I first want to discuss why we use discount and premium the main reason to be using discounted premium is because it shows where risk to reward is more favorable for example if I was to enter a long position right at the equilibrium of the range and put my stop on the low and put my target on the high my wrist reward would be one however the further into discount I get the higher or more favorable my wrist reward becomes the same goes for entering a short position if I was to enter a short position at the equilibrium and put my stop on the high in my target on the low I would have a risk to reward of one however as I get deeper into premium my wrist reward becomes greater with that being said if I am looking for a short position I am looking for PD arrays in a premium to get short if I'm looking for a long position I am looking for PD arrays at a discount to get long for this first example we are going to look at NASDAQ on the daily chart and the first thing we want to do is identify a range well we have a swing low right here price leg up so I'd want to Mark out this I to this low now one thing with ranges is they are expanding so price moves higher we're going to track that with our equilibrium range so as this moves higher we're going to move it higher with it we will continue to do that until a high is put in now if this is the high let's see okay so we put in a swing High there now if we're going to be looking for long positions what do we want to look for we want to look for a discount PD array do we have one yes we have a fair value Gap right here so if I'm looking for Longs I want to be looking for Longs in here let's see what happens and see we reach into that discount PV array and then move higher from there for this next example we are going to look at the dollar Index or dxy and the interactions between equilibrium ranges so if you notice here we have a move up here and so if we Mark that out from our high to the low that made the new range we have our equilibrium range so with that let's drop down to the Daily Now from here we are looking for long positions or a draw on liquidity for short positions what would we want to look for we would want to look for PD arrays in a discount so looking into our discount here what do we have well we have a fair value Gap here so letting this play out let's see where price heads for and there we go we reach our discount PD array now we look do we have a new Range Yes we made a range when we went from this high down to this low so marking this one out so from here we would want to see price reach into a premium of the previous range so letting a day play out now we have a reversal model so if you look right here we swept this lower time frame low we've broke structure up and then if we Mark out this displacement range or this High to this low we are left with a range that shows premium and discount so just like before if we are looking for long positions I want to look where I want a PD array in a discount well if I look left what do I have I have an order block so letting this continue price reaches into here into a discount and respects the opening price of that order block now we expand higher well what do we have now that we made a new range well we can go from our high to our low now we have another range so if price was to come back down I would want to see it reach into a discount and fast forwarding to the new day we put in a new high so I track my premium to that high and where do we go into a discount for this next example we have the pound dollar on the daily chart if you notice we filled this daily fair value Gap and then we make a new high and we have an aggressive displacement range right here so marking this out from high to low if price wants to draw back into a discount do we have a PD array in discount for it to reach for we do we have a small little fair value Gap right here going to the next day we get a sweep of Monday and Friday's high right here it closed back in next day model wants us to drop down get a reach for that fair value Gap so now if I'm going to be looking for Longs and a discount I want to see some sort of raid on previous day low or some sort of setup right here we rated previous day low close back in and what do we have above us a fair value Gap so on the next day I would want to see price reach back up so for that we'll go down to the 15 minute chart and look at some price action so if we look right here we start our new day have midnight marked out our Asia range high and low and we sweep this Asia low and all these lows over here filling this fair value cap then we get an aggressive move higher and so what does that create it creates another discount in premium range for this one I will also Mark out an OT go from here if I was looking for a setup I'd be looking for an OTE entry and then a target of that daily fair value Gap and if you notice by entering at a OTE my wrist reward is 3.43 there versus 1.6 at an equilibrium so letting us play out continuing ahead we reach into our OTE and it's important to notice how there are no candle closes below there right it's respecting it okay move higher and then there we go we reach up into that daily fair value Gap and we end up going quite a bit higher than that but that is how I would frame a setup I hope this video helped out with your understanding of discount and premium and if it did please hit that like And subscribe button and I'll see you next time