Top Down & Bottom Up
Last week I went over the
importance of Support & Resistance (Demand & Supply Order
Flow). This week I want to build on that and introduce Top Down /
Bottom Up.
To become a proficient
Forex Trader it is essential to be able to plan and takes trades within
the context of higher time frames. One of my biggest breakthroughs
whilst learning how to trade Forex was undertaking regular and rigorous
Top Down and Bottom Up analysis, so that I fully understood the context
of the market I was about to trade in.
Once a week I will scan
through each currency pair that I trade and look at the Monthly, Weekly
and Daily charts and analyse and note what I see, particularly key Fib
Levels/Trend Lines or Support & Resistance levels, then every day I
will look at the Daily, 4hr, 1hr and 15 min when planning my trades and
will also work from the smallest time frame upwards marking up what I
can see.
This means I have a good
feel for where a currency pair’s price might go to and where it could
turn plus I will highlight any of the set ups that I trade. It also
means I have a feel for the trend on what ever time frame and where any
counter trend moves might retrace to.
So I can then trade my
chosen strategies on whatever time frame they occur, whether they are
trend or counter trend trades, and manage them within the context of
that and higher time frames.
Having planned my trade I
will even quickly scan through at least the next higher time frame and
the next lower time frame to my chosen trade time frame before pulling
the trigger, to ensure I haven’t missed anything.
Top Trading Tip:
Use Top Down / Bottom Up chart analysis and understand the context
within which to plan your trades and also your expectations of likely
price movement. Before taking any trade look up at least one if not two
time frames and down one.
