All language subtitles for 6 Premium vs Discount

in the previous couple of lessons where we've been essentially looking at a few

more of the i guess you could call them the more basic components of market

structure one of the sort of powerful concepts that we looked at was changes

of character so not only looking at those major

breaks of structure on those major swing highs and swing lows but also looking at

the brakes of those minor lows and all of the internal structure that's stuck

between that swing range right there any structure or price action between the

swing high and between the swing low is essentially that internal structure

those substructure breaks and those minor breaks of structure

so when we have a bullish trending market for example and we have a swing

high a swing low and then another swing high up here right we don't have to wait

for price to pull back before potentially looking for a trade what we

can do or well we don't even have to trade it but we can also just use it to

anticipate what's happening next right and if we see something like this where

we get that minor break of structure and we see that first initial change of

character right where we get that first minor lower low and that minor lower

high right that can then signal to us that this swing run is now over and the

pullback is about to commence now we never know how far price is going to

pull back or even if that's actually going to go

and reverse and cause a swing lower low right but we can use those

those minor structure breaks and that internal structure changes of character

to sort of give us an indication of what may be happening so change of character

is essentially just one sort of tool on its own so in this case one of the

examples that we looked at before was where we see the initial change of

character we see that initial minor low get broken to the downside then we get a

series of lower lows and lower highs right with the internal structure and

then price breaks up we get that minor break of structure there we get another

change of character as price now forms that uh first higher high

again after a series of lower highs right showing us that some bullish

intent has come into the market right that some money has stepped in to break

this series of lower highs to give us that higher high

so we can use that as a signal that potentially the swing higher low is now

in place and potentially we are about to start the next bullish swing leg to make

that higher higher okay but as we were looking at right sometimes it can be a

full signal it can be a short-lived bullish move and then price can you know

again change character to the downside so that series of higher highs higher

lows and higher highs is suddenly broken again we get that lower low so that

first lower low again is that next internal change of character right to

the downside which then gives us another signal and a warning that okay actually

this low is now going to get run this is not going to be the swing high low and

actually we're likely to pull back deeper right and then we pull back

deeper and in this case we form that level low low high lower

low lower high lower low and then we get that

break of that series of lower highs to form that next higher high right we get

that internal change of character and again this may be another signal that

the pullback now has finished that the higher low may be in place and then that

pro trend swing move has about to commence with the first minimum target

of breaking that weak swing high right so

change of character i guess is one tool that we can use to help us

identify that swing run is ending and that a pullback is starting and that

when the pullback may be finished and this next swing leg may be starting but

sometimes it can give us full signals so there's quite a thing there's quite a

few things that we can do quite a few concepts that we can look at and

introduce that can help us to

potentially stay out of getting trapped and trading these full signals

and increasing our probability of only trading the moves when they're actually

going to play out so essentially increasing our strike rate now one of

those concepts as you've probably guessed by the title of the video is the

idea of premium uh versus discounts so like i was saying there's many things

that we can use and we're going to combine them all together but in this

just just as one video alone we're literally just going to look at how we

can introduce the idea of premium discount with everything that you have

learned about market structure up until now

so the idea behind premium and discount is

essentially buy low sell high which is probably you know a trading a dodge that

you've heard plenty of times um essentially all just boils down to you

know how a normal business would run itself sort of in the real world right a

business is going to want to buy their stock right at low prices and then

they're going to want to sell that back to customers at a higher price

than which they bought and they will essentially lock in their profit right

so it's the exact same thing uh you know we're running a business and the

products that we are you know buying selling that we're training is just

simply currency and we want to do the exact same thing we want to buy low and

we want to sell high right so this concept is very very simple it's

the exact same uh i guess price action uh example that we were just looking at

except i have applied this premium and discount range tool here which is

basically just draw this box from the low to the high so in fact what i'll do

is actually show you how i do this so if you go over to the left hand side and

you open this side menu you will get something called the fib retracement at

the start so if you just add that to your favorites if you haven't already

got it on there and then you click that now when you first drag this out that'll

show you what it'll probably look like we change it to the default settings

you'll have this horrendous thing that looks like this right

now we want to do is essentially go into your settings and change this so that

only zero is ticked get rid of everything else and then keep the one

get rid of these and then you want to get rid of those and you only want zero

one and 0.5 and then i tend to get rid of the trend line and then get rid of

the prices and the levels as well and then you can play around with the

transparency there right so that's essentially all you want now you can

change the colors to whatever you want um

and visibility and whatnot but essentially all you want is 0 1 and 0.5

and then make sure the top half and the bottom half are slightly different

colors well even that doesn't really matter um you'll see how we use this in

a second so i just have a pre-saved template like this reasonably neutral

colors now the way you actually draw this tool is if we are in a bullish

market you mark out where your current swing

low is and your current swing high so you know what range we are in you draw

the tool down to the bottom of the swing low and then you can just draw it up to

the swing high there so that's how i recommend you kind of draw it and then

you can keep it on the leg price section and it kind of keeps your charts nice

and simple so you can focus on the actual price action

but anyway we'll talk about that in a little bit when we actually hop on the

charts but for now i'm just going to leave this here just for the purpose of

the explanation so you can kind of really see this concept of how it plays

out so

obviously the higher up and the leg right this is going to be the more

premium pricing this is where price is at higher levels and what often happens

is price likes to pull back um past the equilibrium point so the equilibrium

point is essentially the 50 level it's the halfway point between the low and

the high and the idea is that at that halfway point it's that complete the

fair value is at the equilibrium there's a balance between buyers and sellers um

at that level in terms of um you know the fair value of the actual price so

then once we go below that equal equilibrium level once we go below the

halfway point we are now anywhere in the discount uh level so the idea is

anywhere in this blue box below 50 is we have cheap pricing anywhere above

it in the gray box this is premium and expensive prices

so if we look at the uh previous example we're looking at

right where we get that first initial change of character and the pullback is

starting right and then we got this full signal here so when we saw that change

of character in our favor and then we get this little pullback right you could

be uh looking for

i don't know why that's not working for me let's see

okay anyway but if we were looking for um getting long from down here right

then your price runs a little bit in our favor but then it ends up not working

we're going to change the character and we pull back so as you can probably see

the reason why we use this tool is because it's higher probability if we're

looking to to buy is to wait for price to come down into those discount prices

right so as you can see here we get the change of character the signals that the

swing are on may be over and the pullback is starting we then see that

change of character in favor of the trend right the swing trend so that

gives us that first signal that the high low may

be in place but it turns out to be a full signal we then get that bearish

change of character right and it's in the premium prices so you can if you

want to right look to get shorts here and at

minimum target you know the weak lows the internal we close or target the

equilibrium and into the discount pricing exact same thing here right when

that first initial change of character occurs because we are in the premium you

can look to take counter trend shorts on the idea that price is going to want to

pull back to at least equilibrium but ideally the discount

pricing okay and then waiting for price to reach discount right it can prevent

getting involved in those full signals prematurely so it can increase your

strike rate in catching the true swing high low forming right so if you wait

for price to come down to this discount level the theory is is you're going to

improve your probability of actually catching the move that continues the

next spring run up in towards this high so just got some very simple

instructions over here on the left-hand side essentially of what you want to do

which is identify the price uh the price leg so essentially this this whole swing

leg run up here right this is the leg of price action that whole swing leg and

then you are playing within this swing range right

and then all you do is get your fibonacci tool your and then you

basically use it as your premium versus discount and you can draw it between the

low and the high and then that will mark out the 50 level of your range and then

anywhere below the equilibrium you're essentially buying at a discount

anywhere above you'll be buying or selling in the premium okay so

if price is bullish in this case we we are in a swing bullish trend right it's

best you don't have to right but it's better in terms of increasing your

probability and then stacking those in your favor

to to catch those larger swing moves is to wait for price to come down in here

before you buy now you don't have to do that right you will see that it will be

times where price will not pull back to the equilibrium or the discount it will

just pull back a little bit and it will continue going on so we'll talk about

this a little bit more in a bit when we go on the charts but this is something

that you need to test yourself you need to collect data on and it will obviously

depend depending on your style of training how aggressive you are how

conservative you are um you know what page you're training

and you'll gain that with experience but as a very very general rule a blanket

rule that would apply to everything no matter what asset class you're trading

no matter what individual instrument you are trading this theory will always hold

water that the lower you are buying right within the swing range um you're

going to have the higher probability of catching the low that will actually go

right because you can still buy up here you just have to manage your

expectations that it may just be a short move right and it might not go the whole

way so you can get in and out and be a bit more aggressive with your trade

there okay so if you are going to take that counter

trend short in this case and play that pullback it's higher probability to do

it whilst we're in the gray section right whilst we're still in the premium

pricing and obviously if we were bearish um

right so if we were with a swing trend coming down and then you wanted to play

the the pullback right you wanted to buy this pool pullback up here right let's

say that this is the eq of this high and this low then the

counter trend longs are going to be higher probability anywhere within this

section right below the eq as soon as we start to go above the eq and now we're

in the premium price of this leg right that's where it's much lower probability

to be buying that counter trend short because at any point right that lower

high could be about to go right so

that's the general idea behind that

so if we kind of take this theory just one little last step further

now the way i've kind of drawn the premium and discounts all here is

essentially how i personally draw mine in the live market it's just a bit more

of a i guess a minimalistic way of drawing it i'll just quickly show you

the settings so exact same thing again right just the zero the one and the 0.5

um but all i have showing in terms of the color is the the red line there just

got a little bit opaque as well and then here yeah just basically um have it a

very very thin line gray but i don't have um the background colors showing so

this is why it would be like that right but i've put that down to completely

down to zero so it's completely opaque uh or translucent i guess would be the

word not opaque right i always get that mixed up um just so it's a simple line

essentially just so when you're in the live market and you may have a lot of

drawings and other concepts that we'll be using later it can get a little bit

messy but i don't want that to be messy i want to see price action i want to see

what's going on so yeah this is just at the moment

currently the way that i draw on my charts but yeah do whatever works for

you it makes more sense but i just want you now to understand that um obviously

we're in a bullish market anywhere below the red line is going to be discount

anywhere above the red line is premium so essentially the red line just

represents the 50 the halfway point that is the equilibrium

so when we're in this bullish market right

we know that this is equilibrium and we're expecting price to pull back below

the eq at some point into discount prices whilst we're still within the

premium it's not the high point most high probability area to be buying but

if we want to start to trade that pullback whilst we were above this red

line right anywhere within this section of price action it can

still be high probability to look for those counter trend shorts so we get

that minor breaker structure that kind of first sign that

we get that change of character that the you know we get that lower low and price

won't be pulling back right so then what we can do is what i've done here i'll

just draw one again is then mark this leg out so the

internal leg right that this substructure leg essentially surprises

movement down and now what i want to do is i don't want to just sell here

straight away but we want to what do what it's just the exact same thing

again but kind of like fractal is we want a price to pull back into the

premium of this prior leg right so price pulls back up to form that lower high

now we're in the premium of this internal leg and we're also in the

premium of the swing leg okay so we're in the premium part of the whole swing

leg and we are now in the premium part of this internal leg right so we pulled

back into expenses price of the of the internal leg the expenses expensive

prices of the swing leg and now this is kind of stacking more probability in our

favor that going short here and playing the counter trend pullback is going to

work in our favor okay and then we can use other concepts right like weak

internal lows why is this a weak internal low because it never took out

the last high right so this starts to go down and we're short that can be our

first target at minimum but what we can also target is for price to come down to

the equilibrium and potentially further into the discount okay so there's some

of the things that you can be thinking about right starting to apply all of

those concepts that we know together and just piecing them together as sort of

one big puzzle okay and you can start to see now how our price can be a bit

fractal here so we have you know all of this isn't it

is within the premium up here but then we also have the premium and discount of

this single leg as well okay so again just to summarize if you're going to

play counter trend shorts in a bullish market ideally you want to only be

selling whilst we are in the premium of the swing leg and then once you have the

leg and you're waiting for the pullback and you want to sell that lower high

remember our job is to sell lower highs and buy higher lows okay if you want to

do that wait for that to pull back into the premium and that again is going to

increase your probability now don't get me wrong plenty of times price will just

pull a little bit back and it won't go the way up to premium right and it's

valid to do that you have to work out what's in your trading plan but at the

moment i'm just talking about what is going to increase your strike rate what

is going to be the most probable and this is another tool that we can use the

premium versus discount to really do that for us

okay so on and so forth so at this point this would still be in the premium of

the swing leg and again you can mark out uh this leg as well right we've had now

two essentially you know those two minor bricks of structure to the downside now

just give me a bit more confirmation we're seeing bearish order flow kick in

this potentially could be that third internal lower high so maybe this is

where you want to get short now you've seen enough confluence and then you can

target this weak low or potentially down to the equilibrium or potentially

further right then once we're coming down into the

discount of the overall swing leg we wait for that change of character to go

in our favor to show that price is bullish and then we don't just buy right

as soon as we get that minor breaker structure as soon as we get a change of

character why is it not high probability do to do that well what do we expect

after a breakfast structure we expect a pullback don't we where is it going to

be highest probability to assume where that pullback is going to end

in the discount prices once we get below the

equilibrium right once we get down to the discount anywhere within this zone

here is going to increase the probability of us not getting in too

early where it goes up a little bit and then goes deeper okay so anywhere within

discount prices is going to be higher probability and we're just stacking more

and more um yeah we're just stacking more and more confidence in our favor

we're trying to you know tilt those probability skills in our favor as much

as possible uh and yeah just applying this very very very simple tool um but

in kind of a number of different ways can really really help us and again

see how here what the difference between the counter trend trade is that um you

know we're going to just target either the most recent week low or at least

down into the discount prices but once price has pulled all the way back into

the discount right and we're then get the change of character that

that is now in favor of the swing trade of the swing trend i should say so we

are now bullish all right we're in line with the overall bullish uh trend

so now we have uh the internal structure making that higher high we're in the

discount of that swing range now we wait for the price to pull back into the

discount of this internal leg all right and now we're getting along

here instead of just targeting you know just this high or maybe up into premium

prices because we are pro trends we can then um hold this with a lot more

confidence and try and target this weak swing high

and potentially further right so i am getting a little bit ahead of myself

here talking about trade management but this is you know

i just want you thinking about these concepts and how we're actually going to

apply this you know into our trading plans and into the actual real world as

we dive into the charts so with that said that we've gone through

the theory now so we'll next go and look at how we can apply this to the charts

and hopefully you guys have kind of saved down the the the drawings and

annotations that you have done um from the previous lesson on the markups and

your charts marking out your swing highs and lows and we can now go and apply

this and go and have a look and see how this can really aid us in our analysis