Top-Down Analysis Definition

[Igor 10]

Top-down analysis is the backbone of multi-trend analysis where the trader looks at the picture for the asset on a long term chart (e.g. daily or weekly chart), then looking at the medium term outlook on the four-hour charts, before looking for the trade entry opportunities on the hourly or 15 minute charts, all within the context of the long term outlook. For instance, if the daily chart for an asset shows that the asset is in an uptrend, the trader would be looking for opportunities to go long on the shorter term charts. The top-down analysis here therefore seeks to get the bigger picture, which then guides the trader into the trade to make.