Top-Down Approach. An approach to market analysis used by both fundamental and technical analyst s. It often begins with a more macro analysis of the overall market through major indices (S&P 500, Dow, NYSE etc.) before concentrating on the market at a more micro level.

Top-Down Approach — an investment approach that focuses first on the best sector s to be involved in given the current economic climate and business cycle. From the best sector s, the top down approach then selects those industry group s within those sector s that are more compelling.

The Top-Down Approach analyzes the market by first looking at the macro indicators of the overall market such as the major indexes. Then a more ‘micro’ analysis is undertaken involving sector s or industries or individual stocks. The two types of analysis are then compared.

The top-down approach does have a few advantages over bottom -up investing. For less experienced investor s, top-down investing provides a way to narrow down the most profit able sector s.

The Top-Down Approach.

Using Financial Journalism,

It is a step by step process, most often done as top-down approach. meaning you start by researching global macro economic, demographic and political situation; you continue with researching sector s, industries and economic cycle s they are in;.

First and foremost in a top-down approach would be an overall evaluation of the general economy. When the economy expands, most industries and companies benefit and grow. When the economy declines, most sector s and companies usually suffer.

If you are looking to invest in a lot of different stocks. then the top-down approach is probably the best way for you to find a variety of industries that you can choose from in order to put together your portfolio.

Determining what phase the economy is in at any given point requires a top-down approach involving monetary policy, interest rates. commodity prices, and other economic factors.

So is it final ly time to pay the piper? We’ll figure it out in a second. First, let’s start our top-down approach by looking at the recent and upcoming economic numbers.

Economic Calendar

Not a lot to go over for last week, though what we saw was mostly good. Here are the highlights.

The method of starting with macro economic factors and working down to individual businesses is called the top-down approach. If the order in which the research is done is reversed, that is the bottom — up approach.

At the same time, I wouldn’t write off the possibility of someone who trades many times per day off the 15 min chart or whatever; I still think you need the top-down approach to do so-to more accurately identify the trend .

Reply

Yusuf Hammed says.

Bottom -up investing is a trading methodology where the investor ignores happenings in the broad market and bases their investment decision solely on the action of the security. This approach is the exact opposite of the top-down approach and is more suitable for active trader s.

Stock market investment approach in which the emphasis is on analyzing individual stocks rather than broad economic trends. Opposite of the top-down analysis. Analyst s try to identify stocks that are undervalued or have strong growth potential. It is far more popular than the top-down approach.