EDUCATION: Lagging and Leading IndicatorsHello, dear subscribers!
Today we will consider a new education series topic - the lagging and leading indicators with example on EMA and Pivot levels
Definition: The Lagging indicators based on current and historical market data and are used for describing the events which have alredy occured with the price.
Examples: Moving averages, MASD, oscillators and many other popular indicators.
Advantages: The lagging indicators are very reliable and predict the price movement correctly
Disadvantages: Usually give a signal when it's too late and the most of the desirable price movement has already done.
Definition: The leading indicator try to predict the future price movement.
Examples: Fibonacci retracement, Pivot levels
Advantages: Generate the signals in proper time
Disadvantage: Low win rate in comparison with lagging
Lagging + Leading Example
Leading and lagging indicators eliminate the disadvantages of the each other. The example is 200 EMA + Pivot levels.
The long signals generates when the price is above the 200 EMA, which means the uptrend, and when the price faces with the resistance on one of the pivot levels. Thus, the profit is higher than we use only 200 EMA and win rate is higher than sole pivot level trading strategy.
