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 we have hours and hours of content that
I put together for you over the last couple years if you subscribe it'll be
there in one place for you to view at your own time don't forget to hit that
little Bell notification that way you're gonna get notified at the moment my next
video has been released you can follow us on Instagram and of course on
Facebook and indeed if you follow us on 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