Thomas555 Johnson

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What is top-down analysis in forex trading?

Top-down analysis starts with macro fundamentals, then narrows into specific technical setups. For example, traders may first analyze global growth trends, then central bank policies, then identify technical entries in pairs aligned with fundamentals. Institutions routinely apply this framework, blending economic forecasts with tactical execution. Retail traders can adapt by reviewing economic calendars, monetary policy biases, and aligning them with chart structures. Benefits: trades flow with big-picture momentum. Risks: overemphasis on fundamentals may cause late entries, while ignoring short-term price action. Top-down analysis reinforces that forex is not just charts—it’s the interplay between economies, policy, and timing.