Trading forex the top down approach


Trading forex the top down approach


I have heard this term more in stocks than FOREX. In stocks it means analyzing from the most general factors (fundamentals) such as overall economic measures, then to specific industry groups, finally to companies within the industry group.I suppose the same approach is used in FOREX but not being a champion of the fundamental approach I would not know how it functioned in actual practise. I try to zero-in on a candidate trade using more general tools.

Once I have a candidate I use more specific timing tools to see if I can generate an actual trade. For me it is a 5- step process fromm observation-to-trade. Most investors struggle with the art of picking stocks. Should they base their decisions solely on what the company does and how well it does it. Or should they focus more on larger macroeconomic trends, such as the strength of the economy, and then determine which stocks to buy. There is no right or wrong answer to these two questions.

However, investors trading forex the top down approach develop systems that help them achieve their investment goals. The second option mentioned is referred to as the top-down investing approach to the market. This method allows investors to analyze the market from the big picture all the way down to individual stocks. This differs from the bottom-up approach, which begiForex Trading Pair: Eur UsdIn the weekly chart above, we can see in the highlighted box showing 3 pins that are gunning up.This is a nice indication that Eur Usd could be possibly heading up.Therefore, when we saw this at the start of the week.

When we trade forex, we would always want to trade with the main trend. Sometimes, it is always the simple things that works.In this pair. The charts below show a theoretical trade setup using the daily chart to gain a bias and the lower timeframe to trigger a signal entry.The idea behind this kind of granular trading analysis is that the stop loss can often be placed tighter than when trading the daily charts alone, thus providing a greater theoretical risk to reward ratio.




Trading forex the top down approach

Trading forex the top down approach

Trading forex the top down approach



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