Top-Down Analysis


DEFINITION of 'Top-Down Analysis'

A method of analysis that involves looking at the "big picture" first, and then analyzing the details of smaller components. By first analyzing the overall picture, such as a macroeconomic trend, an investor can start narrowing potential companies to analyze. A trader that uses technical analysis may use top-down analysis as part of their trading system.

BREAKING DOWN 'Top-Down Analysis'

A day trader may first analyze daily or weekly charts to determine the asset's longer term trend, and strong support and resistance levels; and then move to a smaller time frame of charts, to determine a good entry point. For example, if an asset is trending upwards on the daily chart, and there is good bullish momentum on the hourly chart, a trader using top-down analysis could then move to a 15 minute chart and find a good entry point for a long position.

  1. Top-Down Investing

    An investment approach that involves looking at the "big picture" ...
  2. Trend

    The general direction of a market or of the price of an asset. ...
  3. Trade

    A basic economic concept that involves multiple parties participating ...
  4. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Quantitative Analysis

    A business or financial analysis technique that seeks to understand ...
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