Ever use a lagging indicator or a lagging or leading or precedes? On the one hand we will be confronted by a pros and cons of both indicators. By using a lagging or leading indicator, we will be able to determine the condition of the market very well. But choose which one lagging or leading? Let us follow his review.
To note, the indicator can act as a warning against price movements. Indicators can also be used to confirm other technical analysis tools. For example, if there is a breakout on the price chart, indicators are necessarily crossover move accordingly, could serve to confirm the breakout.
Using trenline or other indi order to confirm the weakness of the indicator could be detected. Some traders already use indicators to predict future price direction. Let us first discuss some concepts.
Leading Indicators
A leading indicator gives a signal before the new trend or reversal occurs. If used in market trading, trend following indicator is likely to give false signals. Some popular trends together with indicators include moving averages and MACD. A lagging indicator gives a signal after the trend has started and basically tells you “Hey bro, the attention, the trend has started and you missed the boat.”
Lagging Indicators
As the name suggests, the indicators that are designed to lead precedes price movement. For example, the Stochastic Oscillator is 20, it means that he will use the last 20 days the price action (about a month) in its calculations. All previous price movements will be ignored. Some of the more popular indicators include Commodity Channel Index (CCI), Momentum, Relative Strength Index (RSI), Stochastic Oscillator and Williams% R.
While both can support each other, they are more likely to contradict each other. We are not saying that one or the other should be used exclusively, but you have to understand the potential of each of these tools.
Which is More Important?
Lagging indicators is important, because it will provide information, as far as how the price already running, how long it has taken, what-what has been achieved and the movement has been passed both in terms of momentum, volume and other.
Such as the rearview mirror, then we will know what is passing vehicles, the road what was skipped. Most important is the balance between lagging indicators and leading indicators. But mostly, in my experience, almost every trader friend just focus on lagging indicators. Little or no attention to the leading indicator.
Balance between leading and lagging indicators is very important. Can be seen, we can ‘force’ to obtain a balance between lagging and leading indicators. In forex training, often leading and lagging explanation to be one aspect of determining the success of a trader, in order to run a career that lead to the achievement of successful trading.