Premium and discount: the simplest filter that saved me from bad entries

[Shadow Trader]

Take the most recent significant swing high and low, draw the range, and split it at 50 percent. Above is premium, below is discount. The idea is that in a bullish context you want to buy in discount, and in a bearish context you want to sell in premium. It sounds too basic to matter, but it fixed one of my worst habits: buying breakouts near the top of a range because the candle looked strong. When I applied the filter strictly, a large fraction of my losing longs turned out to be entries in premium. It does not predict direction, it simply keeps the price you pay in context. I also use it to judge whether a pullback is deep enough. A shallow pullback to 30 percent in a strong trend can be fine, but a pullback that fails to reach discount in a bullish structure often leads to chasing. Try tagging your last twenty trades as premium or discount entries and see what the numbers say.

[FXS HongKong Scalper]

Simple filter, big effect, agreed. The weak point is picking the range: on M5 the swing you choose can flip a price from premium to discount. I anchor the range to the swing that produced the latest H1 break of structure and leave it alone until a new break happens. Otherwise it is too easy to redraw it so the entry you already want sits in discount.