Imagine trying to navigate a dense forest looking only at the ground in front of your feet. You might avoid tripping over a rock, but you will likely walk off a cliff.
This is what happens when you trade the 5-minute chart without checking the Daily chart first.
You might see a perfect "Buy" setup, not realizing that the Monthly trend is crashing down like a waterfall.
Top-Down Analysis is the antidote to confusion. It is the process of analyzing the market from the highest timeframe (The Map) down to the lowest timeframe (The Entry).
1. Step 1: The Monthly/Weekly (The Outlook)
Goal: Identify the Long-Term Trend and Major Interest Points.
Frequency: Check once a week (Sunday).
Zoom out until you see 5-10 years of data. Ask yourself:
- Is the market making Higher Highs or Lower Lows?
- Are we at an All-Time High (ATH) or All-Time Low?
- Where are the major Psychological Levels?
Note: You do not place trades here. You just establish the "River's Flow".
2. Step 2: The Daily Chart (The Bias)
Goal: Determine the Daily Bias.
Frequency: Check every morning.
Look at the last 20-30 candles.
- Draw on Liquidity: Is price reaching for a Previous Daily High or Low?
- Structure: Did yesterday's candle break structure?
- Zones: Mark the nearest Daily Order Blocks or Fair Value Gaps.
Decision: "Today I am only looking for BUYS" (or Sells). Never both.
3. Step 3: The 4-Hour Chart (The Narrative)
Goal: Find the Setup.
Frequency: Check every 4 hours.
This is your "Workhorse" timeframe. The H4 chart tells the story of the week.
You are looking for price to tap into the Daily Zones you marked in Step 2.
Wait for the H4 candle to reject a zone or create a new structural leg.
4. Step 4: The M15/M5 Chart (The Execution)
Goal: Sniper Entry with tight Stop Loss.
Frequency: Only look when H4 alert is triggered.
Do not stare at M5 all day. You will get hypnotized.
Only zoom in when price hits your H4 Level.
The Entry Trigger:
- Wait for a CHOCH (Change of Character).
- This aligns the Micro-Trend (M5) with the Macro-Trend (Daily).
- Enter on the pullback (FVG/OB).
5. Why "Multi-Timeframe" Fails for Most
Most traders get "Analysis Paralysis".
Daily says Buy, H1 says Sell, M15 says Buy. They panic.
The Solution: Hierarchy of Command.
- The Higher Timeframe is the General. (Gives orders).
- The Lower Timeframe is the Soldier. (Executes orders).
If the Daily (General) says "We are going UP", you ignore the H1 sell signals. You wait for the H1 to align with the Daily.
6. Practical Routine Checklist
Copy this checklist to your trading desk:
- Sunday Night: Mark Weekly Support/Resistance levels. Check Economic Calendar.
- 08:00 AM (London Open): Check Daily Candle shape. Identify Daily Bias. Mark H1 POIs. Set Alerts.
- 13:00 PM (NY Open): Check if London created a setup or if we are waiting for NY reversal.
- Execution: Wait for Alert -> Check M15 -> Enter.
- End of Day: Journal the trade. Close charts.
Final Thoughts
Top-Down Analysis is not exciting. It is repetitive.
But that is the point. Professional trading is boring. Gambling is exciting.
By forcing yourself to start from the Monthly chart every time, you prevent impulsive emotional trades.
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