Here’s what you NEED to know about Top-Down Analysis…

Hi there! Now, think about this for a
moment, pretty much every big decision we make in our daily lives involve the
top-down analysis approach. For example if you are looking to buy a house or an
apartment first thing you do is look for an area that you want to be in a town or
city. Now, you may need to consider other amenities like the transport amenities.
How far you are from the station and so forth. You may need to look at schools or
local shops or businesses so once you’ve decided on the city or town you drill
down even further to the street and the roads that would be suitable then you
look at the properties that are available within your price range based
on other criteria such as the number of bedrooms the number of bathrooms
everything that you need to accommodate your family now once you find a property
that ticks all these boxes it comes down to value is it good value if it is and
you can afford it well then you chances are you’re going to buy it same a basic
approach applies to when you’re booking your annual vacation first of all you’re
likely to choose a continent but Asia Europe or whatever then you drill down
to a country then you drill down to a town based on other criteria I want to
be near a beach or do some sightseeing or possibly could be a sporting holiday
now these are crucial checks these are crucial checks that need to be ticked
off by looking at the bigger picture before we decide to purchase and we need
to do this exact same top-down analysis approach when it comes to our trading
decisions and that’s exactly what I want to talk to you today about okay so before I get into the
nitty-gritty on why the top-down analysis approach is so important I want
to remind you to subscribe to the channel if you haven’t already done so
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Facebook you can join me live every Monday at 2 p.m. where i discuss the
markets looking for trading opportunities so let’s think about this
top-down analysis approach with something you may be more familiar with
say in the stock market now let’s look at the largest companies in terms of
market value at the moment so that’s Apple shares and Amazon shares now most
of us I know I think it’s fair to say what these companies do many of you will
own Apple devices some of you will love it some of you of course will hate it I
don’t want to go there that’s a personal decision for whatever reason you may
have but I think it’s fair to say we all know what these companies do now let’s
assume you want to invest in Apple or Amazon shares well the first thing
you’re going to do is look at the stock price then the chances are you’re gonna
look to see what that stock price has been doing in the recent past is at the
top of a recent range has momentum be moving the price up or is the price now
making an aggressive move down from the recent highs you may even delve deeper
into the company accounts has the company been making profits is it paying
dividends is the outlook in terms of sales positive going forward now all
this is top-down analysis approach from the fundamental background but also when
you’re looking at a chart we’re looking from the technical background and that’s
what we do we’re looking at what the price had done in the recent past you
have to decide now if the price is good good value in which case you buy it or
indeed if it’s expensive in which case you’ll hold off and think about it for a
time so it’s what the price to be doing in the past
that’s relevant to what we’ll be doing now think about it for a moment what’s
happened in the last five minutes and Apple shares or Amazon shares really is
insignificant to what it’s been doing in the bigger picture and that’s exactly
why we need to use this top-down analysis approach
now as technical traders we’re always looking at historical prices to see what
the price is done in the past that’s what technical analysis basically is
gives us clues that’s what prices may do in the future so to gain an edge in the
market we need to analyze a pair from the top-down analysis approach think
about it dollar gets the Japanese Yelp example if it’s coming off a major level
of support or made your level of resistance will weekly and the daily
chart it’ll be madness not to know that
certainly if you’re trading offer a smaller time frame or shorter time frame
like the five or the 15-minute chart now another key point that I think a lot of
folks traders struggle with is that they don’t know where an individual currency
is in relation to the other currencies on the grander scale of things over the
bigger picture now in order to carve out our edge in the markets having an
insight to this invaluable information I think is like gold dust now I’m gonna
show you on the charts in a moment exactly how this fits into our top-down
analysis approach as well as a look at individual currency pairs and see how
the top-down analysis approach really helps in our technical analysis come on
ok so this is how I typically set up my charts when I’m trading the forex market
using the top-down analysis approach so you can see here we are looking at the
Euro against the US dollar I have four timeframes on my screen I’m typically
trading off the 15-minute chart I have that here in the top left I have the
one-hour chart in the bottom left I have the four-hour chart top right and the
daily on the bottom light I will typically start my analysis on a
particular currency pair by going to the higher time frame first I look at the
daily chart pull up the daily chart I look at my key levels of support and
resistance best way to put in key levels of support and resistance on the daily
is to go to the line it ignores the wicks the highs and the
lows just focuses on the closing price once you’ve done that on the daily
you’ll also do that on the 4-hour as well back to the line chart plotting in
the key areas of support and resistance now for example if I am a trend
continuation trader I’m looking to get in on a trend you can see here by
looking at the 4-hour and the daily the trend is clearly down on the daily you
can see that the price has moved down from 118 down to the low of one fair one
fourteen and a half and on the four-hour win nicely trading below these moving
averages the trend is clearly down so if I’m trend continuation trader I’m going
to be looking to enter these trades as a sell for the trend to continue down now
drilling down to the 1-hour I see that the price has just moved up through
these moving averages they’re actually coming into a level of previous support
on the four-hour which could indicate a new resistance level on the one out now
for example I might wish to get in on a trend on a pullback and this could be
the exact pullback that I’m looking for so now we’ll drill down to the 15-minute
chart and look for my pacific entries looking for sell opportunities on the
newer timeframe bearing in mind the higher time-varying price action is
pointing lower but I’m also aware of the key levels of support and resistance I
can see here now that this 15-minute chart it’s going to be coming into a
level of resistance by looking out here on the daily and indeed on the 4-hour as
well so by having a clearer view of the bigger picture helps me get more
accurate entries on the lower timeframes and also think about this if I’m looking
just at the 15-minute chart I see momentum to the upside I might be
persuaded here now to be looking for buy entries indeed it might be the right
decision but by looking at the higher time frames I can see that this rally in
the euro dollar at this moment and time could be coming in to some
serious resistance to the upside by looking at the daily the fire and indeed
the one hour so that could possibly keep me out of taking a long trade or by
trade on the lower timeframe so here’s an example in the dollar against the
Japanese yen at the moment this market is looking very strong we’re up on the
15-minute we’re up on the 1-hour we’re nicely up in the four hours well
trending up nicely but then if we look at the higher time frame chart on the
daily take that out you can see price is now at this key key level of daily
resistance heavily resisted back in November last year June March this
currency pair is really struggling to get past this level now if you were just
looking at the 5 and the 15-minute chart or even the one-hour chart and you’re
not aware of what’s going on the bigger picture you’re opening yourself up to
higher risk trades always worth knowing what’s going on on the bigger picture
the top-down analysis approach is crucial now we talk about this all the
time in our live streams we stream around the clock as you may know we’re
always looking at the bigger picture first and then drilling down looking for
entries on the lower timeframe minimizing risk and getting us into only
the higher probability trade setups now I want to end off by talking about this
little indicator now as we know in markets trading there’s no such thing as
a Holy Grail however if there was a Holy Grail this would be it for me this
enables me to analyze each individual currency against all the other
currencies at a glance on one single screen across multiple time frames I can
see here color coding on the left the British Pound with all these blue
squares of course all the time frames the 5 the 15 minute the 1 hour for hour
and the daily is colored blue meaning it’s a strong currency
the Australian dollar for example one below red of course all time frames
that’s the weak currency the Australian dollar is this
orange line down here that’s showing you weakness the white line British Pound
showing me strength this shows me the big picture of what’s going on on the
basket of currency pairs it tells me also that these currency pairs that are
moving around together in the middle maybe those currency pairs are not the
payers you should be trading at the moment I rely on this for the basis of
all my forex trading now this tool is absolutely free to all our members you
can come and check it out it signals calm you can sign up for a 7-day free
trial if you wish see what we’ve got you don’t like it you don’t have to stay and
it won’t cost you a dime okay so I hope you found that useful I hope you realize
now that using the top-down analysis really is the only way to increase your
success in the forex market as always if you like my video give me a thumbs up if
you didn’t give me a thumbs down don’t forget to leave a comment I’d love to
hear what you’ve got to see they forget to subscribe to the channel if you don’t
already do so and make sure you hit that little Bell notification you’ll get
notified at the moment my next video has been released don’t forget to follow me
on Facebook at 2 p.m. on London time every Monday
till the next video goodbye and happy trading

29 thoughts on “Here’s what you NEED to know about Top-Down Analysis…”

  1. Thanks for watching this week's video! Let me know if you trade with top-down analysis and how are you finding it… Also, tune in on my Facebook live streams, every Monday at 2pm London time! Enjoy!

  2. I am subscribed to your videos. Lately what facinates me in your videos is your network of monitors/Tv/Screens and appliances which you trade with. I would have loved to have this same set up to trade too. Kudos Sir

  3. Here’s a tip for you traders watching mark your support resistance trade 30 min 1 hr chart only look out for pin bars and trade that direction exit trade when opposite pin bar is detected simple let me know how you get on

  4. You never fail to deliver, astonishing content, i'm never leaving forex, just bagged another huge withdrawal with the aid of my broker John K Barron.

  5. Thanks…I just learned a few new things watching this video, as a noob I didn't know that it is best to enter a trade in lower time frames.

  6. Heyy guys don't waste your time in such videos as all these are useless when market crash.
    These people makes us fool

  7. I have been in ForexSignals and only about 3 traders out of all the other 100 traders that share trades can be trusted one of them is Andrew, cause damn ive lost alot copying these traders in ForexSignals that give trades that 90% dont work, at least from experience of copying them.

  8. Hi, I like to do Top Down Analysis because I usually trade following the trend, but I use only one chart and draw the most signicative pivot lines for higher time frames in the same chart. Is that also correct?

  9. Hi Andrew,

    Is it not necessary to use support & resistance on the M15 & H1 with this method?

    Also, when it comes to moving averages I use a 50, 25 & 15 on only the daily to gauge the trend and a 21 & 8 in the M15 & H1 for day trend entries.

    Would it be better to use the same moving averages across all the timeframes instead?

    Would be great to get your thoughts on this. Thanks

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