Once You Understand THIS, You Understand Trading (Top Down Analysis)

If you're watching this video, you've most likely watched other trading videos. You're not a complete beginner, but you're not a profitable trader either. And you hear traders talking about complicated strategies, confusing wording, and sometimes it may even make sense to you until you actually try to implement them on the charts where it just seems like everything you try fails. I've been trading for seven years and I failed for the first three years trading until I understood the one concept that I'm going to share with you today and it completely changed my trading and helped me go from a losing to profitable trader. In this video I'll explain top- down analysis, how I use it, set it up and most importantly how it gets rid of 90% of the noise and makes my trading simple. Then I'll share real examples on the chart so you can see how it works in the markets. So, in this video, I'm going to talk about what is top-down analysis. And this is exactly what has helped me get confidence in my trading by using higher time frames. It also helped get sniper entries with tight risk and massive reward while giving me a clear picture of the overall markets and just giving me more conviction in the trades that I take. This is the one concept that has helped me do all of this. And the goal by the end of this video is for me to help simplify top- down analysis. So no matter what strategy you trade, you can see how to implement this in your own system. So top down analysis is simply taking multiple time frames and putting them together to determine the best overall probability of whether a stock will continue to the upside, go to the downside, or just consolidate. As we know, there's only three ways a stock can move, and that is an upward trend, a downward trend, or consolidation. With this time frame analysis, we're able to determine which stock has the highest probability of doing either one of these scenarios. And because of that, we'll have a higher probability chance of actually winning our trades. So for top down analysis, there's going to be three simple steps that I'm going to talk about in today's video. The first one will be the higher time frame. This will be determining bias. This will be done on the weekly, daily, and 4hour time frame. Then for step two, we'll go over to the medium time frames. This is where we look for an actual narrative or setup. This will be done on the 1 hour, 30 minute and 15 minute time frame. And finally, the lower time frame is where I personally enter. This can be done on the five minute, the 3 minute or the 1 minute time frame. I personally enter on the 1 minute time frame. All right. So the first step is the higher time frame and determining the thesis of the day. Typically for this step, I do this on the weekend. So, every Saturday on my second channel, if you haven't subscribed, there's going to be a link in the description for my brand new channel where I give a weekly outlook of exactly what I'm looking for in the next week. This will help determine my thesis and bias coming into the overall week. And typically, I'll look for market sentiment. I'll look at the trend of the overall market, the current news events that are happening, and whether the market is strong or weak biased. And in those free videos, I explain everything that I just talked about in detail. And I do that every single Saturday on my second channel. So, make sure to subscribe. But how do I do it? Well, to determine bias, it's quite simple. I look at multiple time frames. So, here we have the weekly time frame, we have the daily time frame, the 4hour time frame, and of course, the monthly time frame as well. In these time frames, if we see that all of these time frames are bullish, meaning that they're pushing to the upside, which simply means that they're continuing to make new highs, that means they're bullish. And this means the probability of the stock continuing to the upside is going to be higher. And therefore, this is a high probability stock that I would want to go into the day and I would want to long, right? So, I would want to go long on the stock or buy the stock because the probability of it moving higher is very high due to the fact that every single time frame on the higher time frame is bullish and if the higher time frame is telling you it's bullish, then the lower time frame will of course follow. However, there is also times where the higher time frame may not coalign with the lower time frames. In this example, we can see the monthly time frame is bullish, the weekly time frame is bearish, the daily time frame is bullish, and the 4hour time frame is bearish. So now we have multiple different confluences. Some are saying we're bullish, some are saying we're bearish. So what do we know now? Well, we know that because some of the time frames are bullish and some are bearish, this is going to be a lower probability day or a lower probability stock that we're even looking at. So on days like this, this is where we want to be a little bit more careful. And if we are coming into the day, we want to understand that this is going to be a lower probability day than of course all the time frames of course either being bullish or bearish. Now on this example here, this is the SPY which is the S&P 500. And this is the daily time frame. On the daily time frame, we can see that we had a lot of consolidation for at least one or two months here. We just had straight consolidation. And therefore in this time frame, we were not either bullish, neither were we bearish, right? We were just equal bullish equal bearish, which is neutral. We then broke below here, created this low, and then from this low, we bounced all the way up into this high. So, we then created a brand new higher high than this previous high. Now, once we did this, this confirmed to me that this stock is now bullish, right? I am going to be a little bit more bullish on ES. Why? Because the daily time frame has now broken out of this previous range. Yes, we broke below, but since that low, the only thing that's been happening is buyer stepping in. From there, we then consolidated for a little while and then buyers stepped in again. We then created a higher low. This would have been a good low-risk entry and then buyers stepped in again. We then came back for another retest opportunity here on the down close candle and buyers stepped in again for an all-time highs move. So, you can see once you understand the daily time frame is bullish or once we broke out of this trend, this was a very simple way to understand that the only thing we actually want to do in this market unless market structure breaks is be bullish on the daily time frame. And of course, if we knew that and we knew to be bullish, well, look at this opportunity here. We can see this is exactly where we made all-time highs. We can see this was the previous high here. We broke above that previous high. We made all-time highs here. We then consolidated in this consolidation. Even if we got a lowrisk entry off the low of the consolidation break, we would have been able to ride this entire move up. Let's say we even missed this entry and on the 4 hour we had this break and retest. We could have entered in on this 4hour break and retest for continuation to the upside. Or let's say we even missed that one. We then had this one candle rule that formed that we could have entered in not only one time but two different times for a move back up into all-time highs on SPY. Once again, once you actually understand the higher time frame narratives, we can enter in using the lower time frames to create an even better thesis and entry model. Now that we understand what to do on the higher time frames, what do we do on the medium time frames? Now, this is going to give us a better narrative or setup. This typically we can do on the 1 hour, the 30 minute or the 15-minute. And for me, I typically look at this more near pre-market or right before the market opens. I want to create the narrative or setup at that specific time. During this time, what I'll be looking for is on that specific day, is there any news? What is the trend coming into market open? I'm of course going to mark out my key levels, which I'll show you guys in the examples as well. And I want to see if the stock has relative strength or weakness. Now, what do all of these different things mean? In terms of news on the medium time frame, there are two different types of news events that I'll be looking for. Number one is red folder news events. So, as we can see, these are red folder. If there is red folder news events on a specific day, this is high impact news. This simply means that the market will be waiting for these news events on this specific day. So, we can see on Wednesday, June 3rd at 10:00 a.m. Eastern and 8:15 a.m. Eastern, we have two different red folder news events. So, I know going into the day that I need to be cautious at 10:00 a.m. because the market is already open at 9:30 a.m. Eastern. So, I know at 10:00 a.m. I have to be cautious as there could be a potential spike or drop in the market based off of this news event. So, I'm not blindsided. If there's ever been a time where you enter into a position and it looks really good, it starts bouncing and then it drops really aggressively, most likely that was a news event that you weren't prepared for. However, by understanding these red folder news events, I'm prepared and know exactly the time they're coming as well. On top of that, I need to understand the headlinebased news events as well. So, currently we know the Iran conflict is going on. So, right now for myself, I'm going to be keeping up to date with that just to understand the news events and understand is the market still bullish or is it still bearish? Right now, the US and Iran are confirming a peace deal. This will only help the market push even higher. But being aware of these news events is important and that's exactly what I'm doing on the medium time frames. And of course, I have to draw out my key levels. Now, for the purpose of this video, I'm going to make these key levels very simple for you guys. I personally draw out the previous day high, previous day low, and then my pre-market high and premarket low levels. Of course, the only other levels that I'm going to draw out when I show you the examples is going to be the 5m minute high and the 5minute low that comes into the actual day. So, of course, this is before the market opens. The levels I'm drawing out is pre-market high, pre-market low, previous day high, and previous day low. But once the market opens up, the only other level that I'll add is the 5minute high and the 5minute low level as well. These are the only levels I'm going to draw on the medium time frame. And if we actually see here, those levels were drawn on the 1 hour time frame. If we come over to the 15-minut time frame, we can see this one came up into our pre-market high. We never got a candle closure above, but then we came back for the retest of the previous day high. Big buyer stepped in right off this previous day high area and pushed the stock all the way back up into high of day. So, if we were able to capitalize on this previous day high bounce, we would have been able to ride this stock all the way back up into high of day by simply understanding the right key levels to draw. And when I show you the examples in this video, this will make much more sense. And finally, on the lower time frame, this is my entry time frame. So, this is the 5m minute, the 3 minute, or the 1 minute time frame, depending on what you like. And this is what I'm going to be doing to actually enter the stock while the market is open. So this is where we're looking for actual setups, our actual confluences, our real entry and exits. And this is where we have to be focused on risk management as well. So for me, I'm looking at multiple different setups that I can trade. If you're a newer trader, I recommend looking at only one or two setups, mastering them, and then moving forward. On this channel, I have multiple videos on exactly what each one of these setups is. So whichever one aligns with your personality, you can use for yourself. But for me, I can choose either an opening play, which simply means that I'm looking for a play right into the market opens. So, this can be from 9:30 to 9:34, right as market opens. If there is really a higher time frame narrative where it seems like the market is about to rip, I can trade any one of these plays that I do have. Let's say it's a little bit more of a slower day and the market has some time to develop. Well, after 9:34, once the first 5minute candle is developed, I can trade any of these setups as well. the previous day high and previous day low retest, the one candle rule retest, the opening range retest, which is the five-minute high and five-minute low, or of course, a key level retest. Now, once again, when I get into the examples in this video, I will show you exactly how I use these setups in combination with using the top- down analysis. So, with that being said, now that I've explained exactly how I use top- down analysis in my own trading, let me show you how I use these three simple steps to actually determine what stock to trade, how to trade it, and then of course enter the trade as well. All right. So here we are on the very first example and on this example we are on the daily time frame. On the daily time frame here what do we see? We need to understand the overall bias and thesis of the actual stock. So here we can see the stock had a low down here. We then created a higher low meaning that this low is higher than the previous low showing us that buyers are of course stepping in. We created a high up here. We then created a brand new high showing that once again buyers are stepping in. and we are currently creating another higher low. Overall, this stock is extremely bullish and on the daily time frame, it is moving to the upside. From the daily time frame, we come on over to the 4hour time frame. On the 4hour time frame, we can see the stock had a big move up and then a leg down. After this leg down, we then pushed up again, created another base, and then pushed up again. Now we can see this happening one more time where we have pushed up. We're creating a small base and we know if the stock now breaks above on the 4hour time frame above this previous high that this stock is indeed bullish and we should be looking for a move back to the upside. So on the daily and 4hour time frame we can confirm that the stock is indeed extremely bullish. And from here we can now go over to the 1 hour time frame where we can actually mark out our setups and key levels. Now, on the 1 hour time frame, what I'll be marking out is our previous day high and our previous day low. Now, as we can see, our previous day high is also in co-junction with our pre-market high here as well. So, I don't have to mark out pre-market high because the previous day high hits the pre-market high. And of course, the next level that this stock can get up to is all the way up here at 2280s. So, I'll mark this out as well as this is the previous high or the all-time highs level where if the stock breaks our previous day high level, that's where it can reach. So, now we understand based off of the higher time frame, all we're simply looking for is if the stock does break this previous day high level, this stock is extremely bullish. However, we also know we have this pre-market low here and the previous day low here. So, we would like the stock to hold above those areas for the continuation to the upside. So now what I'll do is go over to the 1 minute time frame as that's where I personally trade. I trade the 1 minute time frame. And on the 1 minute time frame, I'm going to play out the first 5 minutes of the day. And based off the first 5 minutes here, we can see that this stock actually came into our pre-market low area. Buyers stepped in. We push it up into the 5minute high, which we can mark out because that is another setup or strategy that we can trade. And now we're simply waiting for the stock to break above, retest, and look for continuation. So, let's see if we can actually get that breakout and a retest. And right here, we can see this stock broke out. We came back for the retest. And this candle is not only closing above the 5minute high, but it's closing above the previous day high and pre-market high level at the same time. So, we know if the stock is above this level. We already talked about how we have a profit target that is clear all the way back up into this 2280 area. I can look to enter the stock here with our stop loss at a break of the candle closure and the profit target all the way up into this previous all-time highs level. You can see how using the higher time frame, we have a very lowrisk, high probability setup, but also with potential highreward here as well. So, let's enter into a long position here. We're risking about $530 to make about $1,810. Let's play out this trade and see exactly what happens with using the top down analysis with an extremely simple strategy which is of course the 5minute high strategy which I talk about on this channel all the time and we can see just like that we were able to be done the day at 10:30. This is about 60 minutes into market open with a 3.6 risk-to-reward trade by simply understanding how to use top- down analysis with an extremely simple setup. In this case, that was the 5-minute high setup along with the previous day high strategy. So, this was just the first example. Let's go over to another example to help you understand exactly how I implement this in my own trading. All right, so here is another example. We're on the daily time frame, and this is on SNDK. This is a stock that's been ripping to the upside for quite some time now. As we can see, this one has had a very big move to the upside. So, what am I looking for? Well, on the daily time frame, we can see we've had a very, very strong push up. We are getting 2 days of down close candles, but that does not mean that this trend is invalid at all. However, what this does mean is this previous day high level is going to be very valid for momentum. On this specific day, I know one of the most important levels is this previous day high level. Why? Because we had two days of down candles. As we can see here, every time we break that down close candle for a move back to the upside, typically the stock has a bigger push back up into all-time highs. I'm going to mark out that previous day high already as I know this is going to be a very significant level on the stock. And then we can come over to the 4hour time frame to see if there's anything else that we can really mark out on the 4hour time frame. We can see once again just higher lows and higher highs being created all around. And once we understand that higher time frame narrative, this is where we can come over to the 1 hour time frame and see what's going on. On the 1 hour, we can see this is actually a double top. So, we have a high here and then pre-market we're making the same high. So, this is a double top and we know if we break above this, we can actually have some big room back to the upside. So, on the 1 hour time frame, I'm going to mark out our next high area, which is all the way up into 1509. On top of that, of course, I have to mark out the other levels that I set as well, which is going to be our pre-market low, previous day low, and of course, that previous day high that we've already marked out. Now, we can come on over to the 1 minute time frame. This is what I actually trade. And on this specific day, we can see that we're already near that previous day high area. The thesis coming into this day would simply be a break above, a retest of that previous day high, and continuation. Let's see if we can get that or whether the first 5 minutes will develop first. So far, this is the first 5minute candle. So, what I'll actually do is I'll mark out the first 5m minute high up here and the 5minute low down here. Once again, I'm using a box. You can also use key levels as well. However, it's really the same thing as these are small zones. So, what I'll be looking for now because we can see that we did break above the previous day high, but really not strong price action. I want a little bit stronger price action. I'll wait for the break above the retest and continuation. So, let's see exactly what happens. All right. And right here we can see we broke above, we came back for the retest and buyers are stepping in very aggressively at this area. We can enter into a long position here. Our stop loss is going to be the same, which is a break below the candle that we're entering in on. And in terms of our profit target, our profit target is technically all the way up here at 1509. This gives us a 6.5 risk-to-reward trade by simply understanding where the higher time frame objectives are. And therefore, we're risking about $1,300 to make about $9,000 on this specific trade. Let's play out this trade and see exactly what happens. And as we can see, this trade worked very nicely for a move to the upside. It basically stairstepped its way all the way up into all-time highs. And we were able to reach that $1,500 area by combining a simple strategy, which is the first candle strategy, along with the top down analysis to give us the highest probability entry model for these trades. And remember, I give my real-time thesises with trades that I'm looking at every single day in the accelerator to help traders learn how I actually trade while the market is open. But as always, remember, trading is not a get-richquick business. So don't treat it as a hobby and put real work and respect behind this craft. If you want to learn more about any of the strategies I talked about, make sure to click the playlist on screen. Now, if this video helped you, make sure to leave it a like. If you have any questions, put them in the comments down below. Make sure to subscribe to the channel and follow me on Instagram and Twitter for more education. and I will see you in next week's