Dealing ranges, premium, discount and OTE
Lesson 05 · 4 min read · By DT Terminal
Which swing anchors a dealing range, equilibrium, ICT's OTE band at 0.62, 0.705 and 0.79, when a range is spent, and the 20, 40 and 60 day ranges.
Unlock the full lesson in the app
Worked examples, the quiz and the interactive tools are in the app. Free account.
The dealing range
A dealing range is the most recent meaningful swing low to swing high, or high to low. Meaningful means the swing swept liquidity, as in Liquidity the ICT way, or the leg away from it broke structure.
Draw it with the Fibonacci tool from Day 17, low to high when bullish, high to low when bearish. Anchor it on a minor swing and every level from it, midpoint included, is close to random.
Write the range rule into your strategy
Go deeper
For example: "the range runs from the swing that swept a prior low to the high that closed above the last lower high."
Equilibrium, premium and discount
Equilibrium is the range's 50% line. Above it is premium, below it discount. Day 17 covers the idea; ICT applies it to the dealing range.
- In a bullish range, look to buy in discount, below equilibrium.
- In a bearish range, look to sell in premium, above it.
Price in the wrong half is not a signal the other way. It is a reason to wait. A pullback that never reaches equilibrium gives this method no entry at all.
Optimal trade entry: 0.62, 0.705 and 0.79
Optimal trade entry (OTE) is the 0.62 to 0.79 band of the leg retraced, deep in discount or premium. ICT singles out its middle, 0.705. Nothing makes 0.705 special; the band is a definition to test.
Dealing ranges
Three pullbacks, bullish and bearish
- OTE, 0.62 to 0.79
- Equilibrium, 0.5
- The range
Bullish range
swing low to swing high, buy in discount
Bearish range
swing high to swing low, sell in premium
Into OTE
the pullback reaches 0.62 to 0.79 of the leg
Stays in premium
it never reaches equilibrium, so there is no OTE
Spent
a body closes beyond the range: redraw it
Worked example
Example 01: EURUSD H1: a pullback into OTE
The worked example, with every number walked through, is in the app.
Measure pullback depth in the backtester
EURUSD H1. For each range passing your anchor rule, note the Fib depth. After 50, count how many reached the band.Go deeper
Be careful with the precision of 0.705. No study shows price reacts there more than chance. It is the middle of the band, nothing more, and the band itself is something to measure on your market, not assume.
When the range is spent
A range describes one leg. Once price makes a new leg, the old range describes nothing. Keeping it on the chart is the second common mistake.
The test: once a candle body closes beyond the far end (above a bearish range's high, below a bullish range's low), the range is spent. Redraw from the new swings.
Worked example
Example 02: XAUUSD H1: a bearish range that is spent
The worked example, with every number walked through, is in the app.
Example 2, step by step
Both ends qualify: the swing high sweeps the prior high at 4,074.00, and the fall closes below the last higher low at 4,059.00. For a bearish range, the levels count up from the low, so 0.62is the band's lower edge and 0.79 its upper edge.
After the close above the range high, the next range starts from the swing low and whatever new high this leg makes.
Bigger frames: 20, 40 and 60 days
ICT also frames bigger ranges with what he calls IPDA data ranges: the high and low of the last 20, 40 and 60 trading days on the daily chart. IPDA stands for Interbank Price Delivery Algorithm.
Treat the name as a label, not a fact. No public evidence shows a central algorithm delivering price. The useful part is the definition: three ranges anyone can mark the same way, whose highs and lows you can test as liquidity and whose midpoints you can test as premium and discount.
Check yourself
Quick review · 0 of 0