Top Down Analysis

We've all heard the term "Top down analysis" but what are you really supposed to do with it and how do you use it in your favor when picking what trades to take.

The How

Always start your morning off by looking at a monthly chart, this will help show you the over all trend. Be sure to mark the usual spots, open,high, low & close. Also it is beneficial to mark down the range. This will show you how price is moving and at what pace , EX: 5 days into a new month and you see a 100 pt range on the ES monthly chart you can expect there to be a decent amount of pressure in the current direction.

Once done with the Monthly chart work your way down to the weekly,daily,hourly and 15 minute charts. Do the above exercise for each time frame. It is important to also note the direction. EX: is price making HH's/HL's or LL's/LH's.

Picking trades