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 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.
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