Advanced Technical Indicators And Tools For The Modern Day Trader
Technical Analysis uses historical prices to identify trends and support and resistance levels. Technical indicators are derived from mathematical algorithms that use historical data to provide a current value. Most are therefore by definition lagging.
Some of the popular lagging indicators include moving averages and MACD. If you are a short term trader, these types of indicators will most likely be useless to you as their signals tend to be very late. By the time a moving average crossover occurs for example, a significant portion of the price move has already occurred.
On the other hand we have the so called leading indicators. Leading indicators as implied in the name are designed to lead price movements. Most of the popular ones that we know of at the moment represent some form of price momentum over a fixed look-back period. This is the number of periods used to calculate the indicator. For example, a 20-day Stochastic Oscillator would use the past 20 days of price action in its calculation and all prior price action should be ignored.
Some of the more popular leading...
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