Premium Zone

Premium and discount are SMC names for the top and bottom halves of a range. The teaching is to buy in discount and sell in premium, in the direction of the larger bias. Above the midpoint, longs have worse location because you are buying the expensive half of the measured swing. Below it, shorts have worse location. This is a location filter, not a signal. A strong trend spends most of its time in premium and never offers the discount entry. Waiting forever for discount in a runaway trend is how the filter costs you the market. The midpoint is only meaningful for the swing you named.

Define the dealing range before you classify the price. A range from the last external low to the last external high is the usual choice. If you pick a smaller range, premium gets cheap to reach and the filter does nothing. If you pick a huge range, almost all current prices are discount or all are premium, and again the filter does nothing. Once the range is set, do not slide it bar by bar. A long setup that triggers above the midpoint is a premium long. You can still take it if your system trades breakouts. You cannot claim you bought discount.

If your system buys pullbacks in an uptrend, require the pullback to reach the discount of the dealing range, or at least to reach equilibrium, and skip the shallow flags. You will take fewer trades and you will miss some trends. That is the exchange. If your system buys breakouts, premium is where breakouts happen and the discount rule does not apply. Do not mix a breakout entry with a discount sermon. State which game you are in.

Changing the dealing range so that the current price is conveniently in discount. Also treating premium as a short signal in a strong uptrend. Expensive relative to the last swing can stay expensive. And stacking premium with a Fibonacci 61.8 from a different swing and calling it two reasons. Check whether both measurements even share anchors.

Half a range is a crude valuation. It ignores volume, value area, and VWAP, any of which may say the fair prices are in the upper third. Premium is not overvalued in any fundamental sense. It is "above the middle of the swing I drew." When the swing is redrawn the label flips. Keep the range rule fixed or the words premium and discount follow your bias around.