ICT Premium and Discount Zone Identification
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For my first two years of trading, I sold tops and bought bottoms by feel. I lost more often than I won. The day I learned to draw a Fibonacci between my swing high and swing low and force myself to sell only above the 50% line and buy only below it, my win rate jumped without changing anything else about my analysis. That single rule is what ICT calls Premium and Discount.
The ICT Premium and Discount Zone is a part of the broader ICT Trading Strategy. It helps you decide where in a range a trade entry actually belongs — selling only when price is in premium territory, buying only when price is in discount territory.
In this guide, I will show you what premium and discount mean using a simple real-world example, the exact Fibonacci settings used to identify the zones, how to mark a Premium Zone in a bearish trend, how to mark a Discount Zone in a bullish trend, and how to trade them with proper confirmation.
Do not worry — once you know which side of 50% to trade from, this becomes a one-line discipline rule.
Ready? Let us break it down.
The Meaning of Premium and Discount
Let us understand it with an example.
Suppose you want to buy a car with a market value of $120,000. The basic or fair value of the car is $120,000. Premium is the amount paid above the basic or fair value, so anything above $120k is a premium price. Discount is the price less than the fair or basic value, so the price of the car below $120k is a discounted price.
Now ask yourself: would you buy the car at premium or at discount? Of course at discount.
The same logic applies to trading. To buy anything, you want to buy it at discount. To sell anything, you want to sell it at premium.
Premium and Discount zones simply project that intuition onto a price chart using Fibonacci.
Fibonacci Settings for ICT Premium and Discount Zone
Use the following inputs in the Fibonacci retracement tool for identification of ICT Premium and Discount zones:
| 1 | Start |
| 0.5 | 50% Retracement |
| 0 | End |
The 50% level is the midline. Anything above 50% is the Premium Zone. Anything below 50% is the Discount Zone. The two extreme zones (above 79% and below 21%) are the deepest premium and discount, respectively — the highest-probability entry areas.
What is the ICT Premium Zone?
As discussed earlier, traders use the Premium Zone to sell. So the ICT Premium Zone is utilised in a bearish trend mostly.
To identify the ICT Premium Zone in a bearish trend, draw the Fibonacci retracement tool from Swing High to Swing Low.
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The area above the 50% Fib retracement level is the Premium Zone, where you will look for sell trade execution after a confirmation like an ICT Market Structure Shift.
What is the ICT Discount Zone?
Traders use the Discount Zone to buy. So the ICT Discount Zone is used in a bullish trend primarily.
To identify the ICT Discount Zone in a bullish trend, draw the Fibonacci retracement tool from Swing Low to Swing High.
The area below the 50% Fib retracement level is the Discount Zone, where you will look for buy trade execution after a confirmation like an ICT Market Structure Shift.
How to Trade ICT Premium and Discount Zones — Step by Step
The unified trade flow:
- Confirm the higher-timeframe trend. Bullish for buys, bearish for sells.
- Identify the relevant swing high and swing low on your bias timeframe.
- Draw the Fibonacci tool — high to low for a bearish trend, low to high for a bullish trend.
- Mark the zones. Above 50% = Premium. Below 50% = Discount.
- Wait for price to retrace into the relevant zone — Premium Zone for sells, Discount Zone for buys.
- Drop to a lower timeframe and look for an ICT Market Structure Shift in your trade direction as confirmation.
- Enter on the close of the MSS candle or on a clean retest. Stop loss beyond the swing extreme that produced the zone.
- Target the opposite side of the range or the next opposing PD Array.
Bonus Tip: Pairing Premium and Discount With PD Arrays
Premium and Discount zones tell you which half of the range to take entries from. PD Arrays tell you which exact level inside that half to enter at. Combined, they narrow your entry from a general zone to a precise institutional level.
For longs in a bullish trend: find a Discount Zone, then look for an order block, fair value gap, or breaker block inside it. Take entry at the PD Array level after MSS confirmation.
For shorts in a bearish trend: find a Premium Zone, then look for a PD Array inside it. Same flow, opposite direction.
For a deeper walk through the PD Array hierarchy, see the ICT PD Array Matrix.
Frequently Asked Questions
Can I trade solely using ICT Premium and Discount zones?
No. You cannot trade solely using Premium and Discount zones. Premium and Discount zones are part of the ICT trading strategy, so you should use them along with other ICT concepts while keeping the current market structure in view.
Does the Premium and Discount Zone change after a break of structure?
Yes. After every break of structure, you have to mark a new Premium and Discount zone. In a bearish trend, when price breaks the low and marks a new low, identify the new Premium Zone by drawing Fibonacci from the latest swing high to swing low for fresh sell entries. In a bullish trend, when price breaks the high and makes a higher high, look for a fresh Discount Zone by drawing Fibonacci from the fresh low to fresh high for fresh buy entries.
Which markets do ICT Premium and Discount zones work in?
ICT Premium and Discount zones work in every market where price is delivered live on a price chart — crypto, Forex, indices, and stocks. The Fibonacci-based logic does not depend on the asset class.
What is the difference between Premium and Discount?
Premium is any price above the 50% midline of the range — the half of the range where you look for sell entries. Discount is any price below the 50% midline — the half where you look for buy entries. The midline is the fair value reference point.
What confirmation do I need before entering a Premium or Discount Zone trade?
An ICT Market Structure Shift on a lower timeframe in the direction of your bias. Without that confirmation, the zone is just an area of interest — not a trade.
Where do I place stop loss on a Premium and Discount Zone trade?
Beyond the swing extreme that produced the zone — above the swing high for a Premium Zone short, below the swing low for a Discount Zone long. The swing extreme is your invalidation: if price closes through it, the trade thesis has failed.
Can I use Premium and Discount zones on every timeframe?
Yes, but the deeper the timeframe, the more reliable the zone. Daily and 4-hour zones are most reliable for swing trades. For intraday entries, mark zones on the 1-hour or 15-minute, and use 5-minute charts for execution after the MSS confirmation.
ICT Premium and Discount PDF Download
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Wrapping Up
We hope this guide helped you understand ICT Premium and Discount zones and how to use the 50% Fibonacci midline to filter your entries.
The single biggest edge of this concept is discipline. Most retail traders take entries anywhere price reaches a level. By forcing yourself to sell only above 50% and buy only below 50%, you eliminate half the bad entries before they happen. The Fibonacci does not have to be perfect — the discipline is what works.
Pull up your favourite pair this week. Pick the most recent obvious leg. Draw the Fibonacci. Mark the 50% line. Then look back at the last twenty trades you would have considered, and check how many of them were on the wrong side of that midline.
✨ Update: I've launched my ICT Trading Strategies PDF eBook! Check it out at ictpdf.com .
Like if I place fibo from swing high and swing low or vice versa and then if there is a void which rises in between premium and discount. Will the whole void be valid draw on liquidity in equilibrium or just half. Hope you understand cause english is not my native language.
whole void is valid but ICT Consequent Encroachment is the most reactive level
Hi Mr Rana. Thank you very much for your time. I’d appreciate your input on something puzzling me. I understand price moves from internal to external but when marking discount to premium in a internal to external range, price often continues to expand bullish and do not return to the discount of that range? It may even retrace only to an area still within premium of that range and continues expanding bullish without coming back to discount at all and I’m having a hard time determining which price range leg will come back to discount and which will continue expanding. Please can you give me some light on this or maybe a resource to point me to. Thank you very much for your time.
Sure
Look for the price structure even if does not come to the discount zone and gives early confirmation of going up you can trade it with that.
Basically we wait for the discount area during bullish price to minimize our risk.
If your rsik apetite allows you then you can trade it early