Premium & discount Strategy
Here's a trading strategy cheat sheet for fluid trades traders using premium and discount zones:
Last updated
Here's a trading strategy cheat sheet for fluid trades traders using premium and discount zones:
Last updated
Understanding Premium and Discount Zones
Premium Zone: An area where the stock is trading above its typical valuation range, indicating potential overvaluation.
Discount Zone: An area where the stock is trading below its typical valuation range, indicating potential undervaluation.
Entry Strategies
Premium Zone (Potential Sell Opportunity):
Look for signs of potential reversal or pullback (e.g., bearish candlestick patterns, overbought indicators).
Consider selling short when the stock enters the premium zone.
Discount Zone (Potential Buy Opportunity):
Look for signs of potential reversal or bounce (e.g., bullish candlestick patterns, oversold indicators).
Consider buying the stock when it enters the discount zone.
Exit Strategies
Set a target profit level (e.g., 1-2 times the risk) and exit at least a portion of your position or at the equilibrium.
Use a stop-loss order to limit potential losses (e.g., above the premium zone for short trades, below the discount zone for long trades).
Risk Management
Start with small position sizes (e.g., 0.5-1% of your account per trade).
Use stop-loss orders to protect against reversals.
strategystrategyRemember, trading involves risk, and it's essential to practice with a paper trading account before risking real capital. Always start small and gradually increase your position sizes as you gain experience and confidence in your trading strategy
