Updated: May 3, 2022
Top-Down analysis can be the best way to analyze your charts once you get the hang of it. It's all about timing and matching the right timeframes together. I've created a quick video you can view to help you do your top-down analysis using the monthly, weekly, and daily timeframes.
You need knowledge of trends first
The most important thing about top-down analysis is you need an understanding of how price flows. When I have consulted with traders I often hear them mention beginning their analysis on the monthly timeframe, but rarely do they mention they are identifying the trend on this timeframe.
That is a big no-no. The monthly is the best timeframe to begin a top-down analysis. It is best to start at the beginning of the month because it gives you details on how the previous month just ended so you can know the direction to trade for the next month.
Why Does Top-Down Analysis Matter?
It matters because your time matters. As a swing trader, your goal is to hold trades so you don't have to keep babysitting your trades. If you begin analyzing your trades in the 1-hour timeframe you'll set yourself up as the trade babysitter of the year.
Top-down analysis is as it reads. Top means high for the higher timeframe. Down means to drop down to the timeframe, you will enter your trade on, and then you hold the trade until it reaches your desired take profit or stop loss.
Compare your time to analyzing the trend and you'll begin building the foundation of your trading schedule and edge(approach) in the market.
Do you struggle with identifying the trend and the candlesticks that tell you when the trend will change? If so, do yourself a favor and grab a copy of my ebook now.
The Best Time To Use Top-Down Analysis
This is the part where you want to take notes. Let's dig into the best times to apply top-down analysis.
Monthly timeframe: the first of the month( candle closes 1st of the month)
Weekly timeframe: The beginning of each week( candle closes every Friday)
Daily: The beginning of each week( candle closes every day at 5:00 pm EST. Monday-Friday)
Watch Me Do This In Real-Time
Here is a video of me using this technique on CADCHF. This pair is slow-moving that has been trending very well recently. Don't forget to subscribe and like the video to my Youtube video while you're watching it.
Knowing how and when to use top-down analysis can only strengthen you as a forex trader. You can be sure to learn more and get a great foundation by reading my ebook to learn how to read and trade alongside the trend.
Or you can learn from me by working with me for 6 weeks in private VIP sessions where you become my client and I teach you my strategy myself. Ready to invest in yourself? Click below and schedule a free Discovery Call with me.