Top-down: building the trade
Lesson 23 of 23 in the course “Technical Analysis”. Free, with animations and a quiz.
Top-down
All the course lessons fit into one sequence. On the weekly you see the main trend and big levels. On the daily, the HH and HL structure, Fibonacci and waves. On the 4-hour you look for a zone where several reasons meet. On the 1-hour you wait for a signal candle and set a precise stop. The higher timeframe picks the side, the lower one picks the moment.
The checklist
Pilots run a checklist before take-off even after a thousand flights. Same for a trader. Six questions: is the trend on my side, am I at a strong zone, is there a signal, is the stop beyond the zone, is the target at least twice as far as the stop, is the risk 1% or less. If any answer is “no”, skip the trade. It’s the simplest way not to trade on emotions.
The 1% rule
How much to buy isn’t decided by confidence but by the stop. The 1% rule: if the stop hits, you lose no more than 1% of the account. With $1000 that’s $10. If the stop is 2% from the entry, the position is $10 ÷ 0.02 = $500. That way even 10 losing trades in a row won’t wipe out the account, and you’ll have time to learn.
What’s next
Leo finished the course and now checks the pictures in his feed himself. To keep growing, keep a trade journal and come back to the trainers: they’re always open to train your eye or test a new strategy with no risk. Make your first real trades with the smallest size, strictly by the checklist. And now, the final trainer: you’ll build the plan on one chart yourself.
Check yourself
- In what order do you look at timeframes?
Correct answer: Week → day → 4 hours → 1 hour. Top-down: the higher timeframe picks the side, the lower gives a precise entry. - Account $2000, risk 1%, stop 4% from the entry. What’s the position size?
Correct answer: $500. 1% of $2000 is $20. Position = $20 ÷ 0.04 = $500. Then the stop costs exactly $20. - Everything on the checklist fits except one thing: the target is only 1.2 times the stop. What do you do?
Correct answer: Skip the trade or wait for a better entry. If even one item fails, skip the trade. A poor ratio can’t be fixed with leverage or by removing the stop: that only increases the risk.