You Are Using Discount and Premium Wrong! - EQ For Expansions

Summary

In this video, the creator explains their unique approach to using equilibrium in trading, contrasting it with the traditional use of discount and premium. By focusing on Fibonacci levels and the phases of price action (expansion, consolidation, retracement), they detail how to analyze price movements and identify key areas of support and resistance. The process involves using daily closures, equilibrium (EQ), and protected levels to predict price direction, with real-time examples and explanations. The fractal nature of this concept allows for its application across different timeframes, enhancing trading decisions.

Takeaways

• 📏 The creator uses equilibrium differently from ICT, focusing on the opposite interpretation of discount and premium zones during expansions.
• 📐 Fibonacci is simplified to mainly use the 0.5 level, measured from wick-to-wick rather than candle bodies.
• 🚀 In expansion phases, price usually does not retrace deeply, so the upper half of a range is expected to act as support in bullish moves and the lower half in bearish moves.
• 🔄 If equilibrium does not hold, bias can be flipped to anticipate liquidity runs toward the opposite side of the range.
• 🧱 PD arrays (fair value gaps, order blocks, protected highs/lows) are mapped within the relevant half of the range to anticipate continuation points.
• 📅 Daily candle closures paired with equilibrium help confirm or invalidate directional bias for the next day.
• ⏳ Intraday structure—especially change in state of delivery (CHoSD) and opposing candles—provides entry confirmation after higher-timeframe equilibrium is respected.
• 📉 Expansion candles often respect opposing candles or up/down-close series, signaling continuation rather than deep pullbacks.
• 🔍 EQ behavior is fractal and works across multiple timeframes (Daily, 4H, 1H), though higher timeframes are preferred for clarity.
• 🧠 The trader uses a consistent 'if-then' logic: if EQ holds, expectation is continuation; if EQ breaks, look for liquidity grabs and directional reversal.
• 📊 Wick-focused EQ is emphasized when candles have unusually large wicks, offering more precise levels than full-candle ranges.
• ♻️ After multiple expansion candles, the trader expects a phase change (retracement, consolidation, or reversal) and waits for new daily clues before continuing.

Q & A

How does the author differ from traditional methods in using discount and premium zones?

The author uses the opposite approach from ICT's method, where instead of buying in the discount zone and selling in the premium zone, they focus on using equilibrium during expansions. They primarily look for price reactions in the upper and lower halves of the range, which can indicate continuation or reversal.

What Fibonacci levels does the author use for equilibrium?

The author uses a simple Fibonacci retracement with levels at 0.5 and 1, generally removing the 0 and 1 levels. This helps to identify the equilibrium zone, which they consider critical for price action analysis.

Why does the author measure candles from Wick High to Wick Low instead of using candle bodies?

The author measures from Wick High to Wick Low to more accurately capture the full price range. This method aligns with their use of equilibrium and helps identify key price levels for potential reversals or continuations, in contrast to body-based analysis used for identifying order blocks.

What is the importance of the 'expansion phase' in the author's strategy?

The expansion phase is crucial because it represents a period of strong price movement, where the price rarely retraces back into discount or premium zones. The author uses this phase to anticipate price continuation and identify areas where equilibrium may support further price movement.

How does the author use the concept of 'PD arrays' in conjunction with equilibrium?

PD arrays (Protected Price Levels) are used to identify potential support or resistance levels. The author looks for these arrays within the upper or lower half of the range to determine where price is likely to respect the equilibrium and continue in the anticipated direction.

What is the significance of respecting the upper or lower half of a range?

Respecting the upper or lower half of a range indicates that price is either continuing its trend (upper half) or reversing (lower half). This behavior helps the author confirm their trading bias and decide whether to expect further expansion or a shift in price direction.

How does the author determine whether a price action setup is valid?

The author uses an 'if-then' scenario approach. If a particular price action setup respects the equilibrium, they expect price to move in a certain direction (higher or lower). If not, they adjust their bias, looking for other setups, such as a change in the state of delivery or an order block formation.

What role does the 'change in state of delivery' play in the author's strategy?

The change in state of delivery signals a shift in market dynamics, indicating a potential reversal or continuation. When price breaks through key levels, such as fair value gaps or order blocks, and then moves in the opposite direction, it provides confirmation of a new market phase.

What is the significance of 'equilibrium' on higher time frames like daily and 4-hour charts?

On higher time frames, the equilibrium provides a reference point for the overall trend. It helps the author identify key price levels that may act as support or resistance, allowing them to better anticipate price movements, expansions, and potential reversals.

How does the author use fractal concepts in their approach?

The author applies a fractal approach, where the same equilibrium and price action principles are used across different time frames. Whether on the daily, 4-hour, or hourly charts, the author looks for similar patterns of price action, ensuring that their analysis is consistent across multiple levels of detail.