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  • Beginner
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  1. Beginner
    Early Stages for Beginners
    8 Topics
  2. Forex Terminology
    11 Topics
  3. Margin & Leverage
    2 Topics
  4. Personal Psychology Questions
    2 Topics
  5. Psychology for Beginners
    7 Topics
  6. Intermediate
    Identifying Scams
    2 Topics
  7. Brokers for Beginners
    5 Topics
  8. Technical Analysis
    13 Topics
  9. Market Structure
    5 Topics
  10. Completion
    Risk Management for Beginners
    8 Topics
  11. Fundamental Analysis
    9 Topics
  12. Advanced
    Using Indicators
    6 Topics
  13. Technical Analysis (Part 2)
    8 Topics

Top-Down Analysis

Starting from a higher time frame and scaling down to lower time frames is what we call “Top-Down Analysis.” Traders want to see the direction of a pair from a birds-eye view to determine the current trend so they look at the weekly/daily time frame. Once the trend is determined on the higher time frame, they scale down to the 4H time frame to look for any potential confirmation areas that confirm what the weekly/daily are saying. Afterwards, they may scale down to the hourly time frames where they can find entry points. Scaling lower is good for counter trendlines and sometimes, super close/sniper entries (but you also may be prone to fakeouts).

Essentially, you are looking at the charts from top to bottom to come to a bias on whether you want to be a buyer or seller in the market. An example of how this would work is starting from the daily timeframe, where you can see if the market is trending up or down. Let’s say you determine price is currently in an uptrend. After using a trendline to show where price is heading, you scale down to the 4-hour timeframe. On the 4 hour time frame is where you may see price is currently bearish, heading down to retest the trendline you drew on the daily time frame. You then draw a counter trendline. Once the trendline is tested and the counter trendline is broken, you want to get a closer look at what price is doing so that you can find where you want to enter, which can happen on a 1h time frame. You can find a stronger entry from a 4H time frame as well, seeing as how it provides stronger confirmation.

You can use whatever time frames you prefer to see structure. If you prefer to go higher, do it. If you prefer to go lower, that’s fine too. There are multiple ways to conduct top-down analysis.