Benjamin A5 Allen

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What is top-down analysis in trading?

Top-down analysis starts with a broad view of global markets, narrowing down to individual instruments. For example, a trader analyzes global economic conditions, then central bank policy, then currency pair charts, before making a trade. This approach ensures trades align with macro trends while being technically sound. Top-down analysis helps avoid trading against dominant forces like monetary policy. It is especially useful for swing and position traders who hold trades for days or weeks.