Trading in the right context can make a huge difference. Being able to understand the market context in which you are making trading decisions can help you filter out potentially troublesome trades and enable you to get into high probability trades more often. In this article, we will explain which tools and concepts to use when it comes to understanding the market context and how it can help you make better trading decisions.
Every good market analysis starts with a top-down, multi time frame analysis. Every week you should take a look at the monthly and weekly time frame first. You don’t necessarily need to get too much into the details here, especially if you are trading on the 4H, 1H or lower time frame, but understanding the higher time frame context is key. Here are a few things to look for and ask yourself on the higher time frame: