Premium & Discount Zones

Premium and Discount Zones are Smart Money Concepts (SMC) terms that describe the relative position of price within a defined range—such as a swing high to swing low. The range is divided using the 50% midpoint (equilibrium): price trading in the upper half of the range (above the 50% level) is considered in a Premium Zone, meaning it is expensive relative to the range. Price trading in the lower half (below the 50% level) is in a Discount Zone, meaning it is cheap relative to the range. In SMC, the core principle is that smart money buys at a discount and sells at a premium. Traders look to enter long positions when price retraces into the discount zone within a bullish structure, and short positions when price rallies into the premium zone within a bearish structure.