CHAPTER 5
PD Arrays II: Price, Premium and OTE
The same order block is gold in discount and poison in premium. Marking a zone is not enough - where that zone sits inside the range decides whether the trade pays.
5.1Drawing the Dealing Range
A dealing range is drawn from the swing low the move started from to the swing high it reached (or the reverse). The 50 percent point between them is equilibrium.
| Area | What to do |
|---|---|
Premium (50-100%) | Look for shorts, not longs |
Discount (0-50%) | Look for longs, not shorts |
Equilibrium (50%) | The decision line; never an entry by itself |
OTE (62-79%) | The best entry pocket, with the trend |
5.2OTE - Optimal Trade Entry
After a BOS, enter on the retracement between 62 and 79 percent. The 50 percent equilibrium sits below, which keeps risk small and reward large.
The math is simple: entry at 79 percent with the stop at 100 percent (the swing low) is 21 percent of the leg of risk. A target at the old high (136 percent) is 57 percent of reward - about 1:2.7. Entering at 62 percent widens the stop to 38 percent but fills less often.
5.3Consequent Encroachment (CE)
The CE is the exact 50 percent line of any FVG or order block. Why 50? Because the bulk of the resting orders sit in the first half, and once the 50 percent breaks the setup is usually compromised.
In practice, a limit at the OB's CE roughly doubles the R:R because the stop is closer, while still filling often enough.
5.4Fibonacci: Which Levels Actually Matter
| Level | Use |
|---|---|
50% | Equilibrium of the range |
62% | Top of OTE, needs LTF confirmation |
70.5% | The middle of OTE, a favourite of ICT |
79% | Bottom of OTE - the best price |
100% | The swing extreme - where the stop goes |
136 / 162% | Extension targets |
Fibonacci does nothing by itself - it is only a language for price ratios. A Fibonacci level matters when an OB or FVG happens to sit at that same price.
5.5Standard Deviation Projections
Measure the height of the first range of the day, usually the Asian range. After the manipulation ends, project that height once, twice and two and a half times for targets. It works remarkably well on NQ and gold.
5.6The Range Inside the Range
When price is stuck in a small range inside a big one, be patient. It usually sweeps one edge of the small range first, then delivers toward the big one.
5.7Drill: Mark 30 Ranges
- Draw last week's range on thirty daily charts.
- Mark premium, discount and EQ on each one.
- Write which zone price is trading in now.
- For OBs that sat in premium, calculate what a long would have done.
Educational material only · not financial advice.