what is top down analysis in trading?

Top-down analysis involves marking support/resistance levels starting from the higher timeframes then ending at the lower timeframes. For me when performing top-down analysis every morning before London open, I start from the monthly timeframe, and I mark obvious support /resistance levels such as previous month high and previous month low.

I then go down to the weekly timeframe and mark the previous week high/low, then I go down to the daily timeframe and mark the previous day high/low. then i end at the 1-hour timeframe where I mark out the various forex sessions (London, New York, Asia)

Top-down analysis of any instrument is a way of marking out point of interest on a chart, beginning from the higher time frame. In the attached image we are on a monthly time frame and the red dotted line is what i used to mark the previous month lowest price.

When I switch to the lower 5-minute time frame, you will notice that the previous month low is acting as resistance to price, causing a downward movement after retest. This is a classic example of how top-down analysis can be applied to trading.