ICT Core Content Month 1 Videos 4-5 Notes

Premium vs Discount, Equilibrium, and more!

InfinityNovember 28, 2022
ICTs Month 1 YouTube playlist of all 8 videos
The following is my synthesized notes, video screenshots, and my custom
visualization for each of the Month 1 videos. My process included watching each
video (sometimes multiple times) and taking detailed notes. Then I came back and
organized, simplified, and categorized the notes into the form below.
Equilibrium Vs. Discount
Video 4/8
YouTube Video
Equilibrium Vs. Premium
Video 5/8
YouTube Video
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.
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
Gallery