The notes below are combined from the videos “Equilibrium Vs. Discount” & “Equilibrium Vs. Premium” since both videos use the same model but just in different directions.

Equilibrium Vs. Discount

Video 4/8

Equilibrium Vs. Premium

Video 5/8

Equilibrium Vs. Premium

Premium vs. Discount Model Notes

Definitions

Swing High/Low = four candles on any timeframe
- Swing High
  - Start with any candle
  - 2nd candle has a higher high than 1st candle
  - 3rd candle has a lower high than the 2nd candle
  - 4th candle has a lower high and a lower low than the 3rd candle
- Swing Low
  - Start with any candle
  - 2nd candle has a lower low than the 1st candle
  - 3rd candle has a higher low than the 2nd candle
  - 4th candle has a higher low and a higher high than the 3rd candle
Market Range = the largest range in price between any swing high and swing low on a chart. Look for swing highs and swing lows with the strongest retrace reactions
Impulsive Price Swing = the indication that there has been displacement at that level
Displacement = location in price where someone with a lot of money comes into the marketplace with a strong conviction to move price higher or lower very quickly
- Displacement is characterized by strong and quick price movement that leave behind Fair Value Gaps
Equilibrium = the midway point between a swing high and a swing low
- Also known as the Fair Market Value because it represents a fair price between the swing high and swing low

Drawing

Use the Fibonacci Retracement drawing tool on your charting platform that draws lines at the 0, 0.5, 1 levels. Or the 0%, 50%, & 100% levels
Drawing on Down Moves
- Use the Fib Retracement tool to draw a 50% level from a swing high to a swing low drawing from left to right
  - Remember that a swing high or swing low requires 4 candles
- The Fibonacci 50% level is the Equilibrium of the price swing
- If there are multiple swing highs close together to pick from then chose the swing high that is the most recent or closest to the move down
Drawing on Up Moves
- Use the Fib Retracement tool to draw a 50% level from a swing low to a swing high drawing from left to right
  - Remember that a swing high or swing low requires 4 candles
- The Fibonacci 50% level is the Equilibrium of the price swing
- If there are multiple swing lows close together to pick from then chose the swing low that is the most recent or closest to the move up
The best way to start drawing Equilibrium lines is to find the most obvious Impulse Price Swing on your charts and work from there

Purpose

The purpose of the Premium vs Discount Line is a framework to help the trader find higher probability entries
When price is in a Premium it can be considered Over Bought and when price is in a Discount it is Over Sold
- The Premium vs Discount Line is the original Overbought or Oversold indicator!

Characteristics

Equilibrium
- When price retraces past the Equilibrium level (from premium to a discount in an up swing, or from discount to premium in a down swing) it does NOT spend much time below Equilibrium
  - Generally there is a very dynamic price movement away from Equilibrium (especially if there is a higher timeframe context)
  - This happens because if price is in a Discount and the underlying bias is bullish then price won’t stay in a Discount very long because the banks and institutions will be buying because price is cheap
    - Just like when a sought after item at the store is at a discount people will move quickly to by the item because they deem the price to be a good value
  - As soon as the price reaches Equilibrium and below the algorithm will kick to buy mode and start sending the price higher
Optimal Trade Entry (OTE)
- The OTE levels are the range 0.62 to 0.79 on the Fibonacci Drawing tool (or 62% to 79%)
  - The midway points of the OTE range is 0.705 or 70.5%
- In a Bullish price swing the OTE range (Discount) is the highest probability location to go long in
- In a Bearish price swing the OTE range (Premium) is the highest probability location to go short in

Trading w/ Premium vs Discount Line

Buy in a Discount & Sell in a Premium
One Premium vs Discount Line
- Look for swing highs and swing lows that satisfy the four candle requirements
- Draw the Fibonacci 50% line between the swing high and swing low
- Equilibrium is the midway point of a range
- Wait for price to retrace back to the Equilibrium level
- Expect an aggressive impulse price leg away from the Equilibrium
- After price has retraced to the Equilibrium, go to lower timeframes and hunt for buying/selling opportunities
Nested Premium vs Discount Lines
- After drawing the 50% Fibonacci from a Swing High/Low to Swing Low/High AND price trades back to the Equilibrium
- Can enter trade after price trades to the other side of Equilibrium
- BUT also can nest a second 50% Fibonacci line starting from the swing that broke the Equilibrium (or lowest/highest point afterward) and end at the next swing high/low
- When price trades back to Equilibrium of the 2nd Fibonacci then you can look to enter (additional) trades there
- Can continue to nest Fibonacci drawings and swings until price take out original (1st) Fibs end point or price reverses off of an ICT Orderblock
- Can also use one Fib drawing over multiple swings (thus skipping swings) and look for Equilibrium and OTE setups
Anchored Premium vs Discount Line
- Use the 50% Fibonacci Drawing tool to mark Premium to Discount over the largest Market Range (between swing high/low to swing low/high) on your chart
- Leave that Equilibrium line in place as long as price trades within that range
  - This line is the macro Equilibrium level. Only buy when price is in this Anchored Discount and only sell when price is in the Anchored Premium sections
- Can continue to draw more 50% Fibonacci lines on other swing highs and lows as long as price is still inside the original Anchored 50% Fib line (looking for high probability setups)
- The Anchored 50% Fibonacci line can itself be nested. As long as more price swing are inside larger price swings
ICT Orderblocks
- When price goes to a deep retracement of a price swing, can also look for retracements at ICT Orderblocks
- ICT Bullish Orderblock is the last down candle before the bullish move up OR the down candle above your swing low
- ICT Bearish Orderblock is the last up candle before the bearish move down OR the up candle below your swing high
- If there are two or more consecutive down candles use the bodies of both candles
Miscellaneous Notes
- If the price does not get back to the Equilibrium line then move on to the next swing and redraw the Fibonacci lines
  - But always consider smaller swings inside your larger range before extending the first original range to an entirely new swing
- If price blows through the OTE levels then most likely it will be a Turtle Soup setup
- Using Premium vs Discount you don’t need to know daily bias
  - Because price is trading inside a range. It does not matter if you are trading in a macro bullish market or bearish market. The Premium vs Discount profile using the 50% level between swing highs and swing lows will always be there
  - You don’t need to break out of the range to make money