In the context of trading, particularly within methodologies like the Inner Circle Trader (ICT), a PD array refers to Premium and Discount arrays, which are a concept used to identify potential trade setups based on specific price levels in relation to time.
Understanding Premium and Discount Arrays
Based on the provided definition, PD arrays help traders analyze price movements by dividing a specific price range (often based on a recent consolidation or swing) into two key areas:
- Premium Range: This is defined as any price level above the midpoint (or 50% level) of a chosen price range or consolidation. Prices in this area are considered "expensive" relative to the recent price action.
- Discount Range: Conversely, this includes any price level below the midpoint (or 50% level) of the same price range or consolidation. Prices in this area are seen as "cheap" or "on sale" relative to the recent price action.
Essentially, the concept helps traders determine whether the current price offers a favorable entry point based on whether it's trading at a premium or a discount compared to a relevant historical price range.
Why Are PD Arrays Used?
Traders using this concept often look for specific price behaviors within these premium and discount areas. For instance:
- They might look to sell when price enters a premium array, expecting it to move lower towards a discount.
- They might look to buy when price enters a discount array, expecting it to move higher towards a premium.
The "arrays" part signifies that various technical analysis tools (like Fibonacci retracement levels, order blocks, fair value gaps, etc.) can be plotted or observed within these premium and discount ranges to identify specific high-probability entry or exit points.
Practical Application
Here's a simplified way to visualize the concept:
| Area | Description | Relative Price Status | Potential Trading Bias |
|---|---|---|---|
| Premium | Above the 50% midpoint of a range/consolidation | Expensive | Looking for Sells |
| Discount | Below the 50% midpoint of a range/consolidation | Cheap | Looking for Buys |
| Midpoint | The 50% level | Equilibrium | Neutral/Transition |
Using PD arrays involves:
- Identifying a relevant price range or consolidation.
- Calculating the 50% midpoint of that range.
- Marking the area above 50% as the Premium zone and the area below 50% as the Discount zone.
- Observing how price interacts with these zones and looking for other technical confluences within either the premium or discount range to make trading decisions.
This framework provides a structural way for traders to view price action, helping them decide whether the current price is potentially favorable for buying or selling based on its position within a defined premium or discount context.
