Smart Money Concepts
Premium and discount zones: splitting a range in half
Take a recent swing low and swing high and draw the 50% line between them. The upper half is called the premium zone and the lower half the discount zone. SMC uses this to describe whether price is relatively expensive or cheap inside that range.
What it is
Equilibrium is the midpoint of the range, calculated as (high + low) divided by 2. Premium is everything above it and discount is everything below it.
The idea is a simple filter: when price is in a rising range, some traders prefer to look at pullbacks into discount; in a falling range, rallies into premium. This is a reading style, not a rule that works every time.
How to spot it
- Choose the swing low and swing high that define the range you care about (the same timeframe as your structure).
- Calculate the midpoint: (high + low) / 2. Many charting tools have a Fibonacci tool with a 0.5 level.
- Shade the upper half as premium and the lower half as discount.
- Redraw the range whenever a new swing high or low replaces the old one.
Worked example (illustrative)
Illustrative example: swing low 100, swing high 120. Equilibrium = (120 + 100) / 2 = 110. A price of 107 is in discount; a price of 117 is in premium. If price later makes a new high at 126, you would redraw the range from the new points.
Common mistakes
- Drawing the range from arbitrary points. The zones are only as meaningful as the swings used.
- Treating 'discount' as 'cheap' in a fundamental sense. It only says price is in the lower half of a chart range.
- Forgetting that ranges change. Old zones lose meaning once structure shifts.
Educational content only, using made-up prices. It is not investment advice and not a recommendation to buy, sell or hold anything. Trading carries risk of loss.
Frequently asked questions
What is equilibrium in SMC?
The 50% midpoint of a swing range, calculated as (swing high + swing low) / 2.
What does 'premium' mean on a chart?
Price in the upper half of a defined range. It says nothing about company value, only chart position.
Is this the same as the Fibonacci 0.5 level?
Yes, the midpoint equals the 0.5 retracement level of the same swing.
Related concepts
Practise this on a live chart
Our free Super EMA + SMC indicator for TradingView marks structure for you. Want guided practice? See the Market Dekho mentorship.
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