A "Lagging Indicator" Can Benefit Your Trading

Traders like to make use of indicators in their trading but, oftentimes, they resent the fact that they “lag the market”. This question again came up during last night’s webinar on Moving Averages.

Keep in mind, that all indicators are going to "lag the market" to a greater or lesser degree since they are all based on an average of price action that has already taken place. Moreover, the longer the chart time frame we use or the greater the number of periods analyzed by the indicator, the more of a lag that we will see.

Even though every trader would like to be in on the very first pip of a move, it is fine to miss the initial move that a pair makes in favor of entering a trade that has a greater level of confirmation behind it.

If we are looking to enter a trade at the very first sign that a move may be taking place, we are going to find ourselves entering many trades based on very short term signals and, consequently, we will be basing our trades on what ultimately can turn out to be a "false" entry signal…one based on very little data.

While we will give up some pips at the beginning of the move, the lagging nature of indicators will get us into trades that have a more confirmation behind them.

Let’s take a look at a 4 hour chart of the GBPUSD for our example…


Moving Averages will give an entry signal when the faster MA crosses over the slower MA in the direction of the intended trade. In this case the 20 period is the faster MA and the 50 period is slower MA.

The initial move to the downside begins at 1.6615 but our Moving Average crossover does not signal an entry until about 1.6455…some 160 pips later. This is what is meant by a “lagging indicator”.

Keep in mind however that entering at the crossover provides the trader with additional confirmation that the move may continue. The trader would not have had that confirmation if they entered at the very first indication that this pair was moving down. Now that we have hindsight, it appears obvious. But at the point where the “Downward Move Begins” on the chart, had we entered there the potential for that being a “false” entry would have been very high.

Also, take note that the pair when shorted at the Moving Average entry signal at 1.6615 is still moving down on the chart at 1.5980…a gain of over 600 pips.

This example is by no means meant to indicate that this is the type of gain traders can expect when using Moving Averages and/or waiting for greater confirmation prior to entry. However, waiting for that confirmation, regardless of the indicator being used, can lead to higher probability entries.

Attached Files:

Posted By reginaldreed : 08 October, 2020
Related Article

News times have become a mystery to traders in the Forex market. Will the market be up? Or down? How far is it up? And even if it is down or how much will go down?     Everything depends on the sub of the news result. The results are good, the market is buzzing, and the bad results are the opposite. There are many traders who keep pending orders on both buy and sell at this time. Keep a certain Pipsot target. But they do not know at all how far the market will go up or down. My request to everyone, do not trade with such risk. Because in all such strategies, the opposite is more than the profit. As you can see, the news seems to have a high impact, but it doesn't. On the contrary. The market moves in slow motion and the buy-sell hits stop loss on both sides.     Again, many questions, brother news sites have a lot of news! Which one should I leave out? This is my writing for them today.   Save the bookmarks to your browser by clicking the link below. Only High Impact News will be shown here. I don't always trade news time. I have been gaining 70% trade with my analysis for a long time. I am still learning today as before.   There is no substitute for learning. The more you learn, the more you will learn. Always try to stay updated. I hope you will succeed.

Any professional independent is open to anyone. However, in particular, many people value domestic professions more because of their advantages, considerations, and desires. There are many such jobs all over the world. It's really fun to work with an outside organization at home. And the young generation of our country is taking this fun very well. And taking with success.   Thanks to technology, people's lives are now much easier, more dynamic, and much more beautiful. Many people's imaginations are now turning into reality with the help of technology. One such blessing of technology is online income from home. Among the many domestic professions, today I will discuss foreign exchange (forex) trading.   First of all, I would like to say that you can earn a lot more from Forex trading at home than from any of the current schedule based outside professions. Yes, indeed. I'm not saying anything to hurt. Forex trading is a type of market similar to the traditional stock market where you make a profit by exchanging currency. This profession is open. You can run your business from anywhere in the world using the only net connection and laptop PC, Open is a business so you are not tied to anyone or anyone to you. You can do the whole process yourself.   Traditional A business If you start with small capital and start-up, why not do that type of business? How much profit can you make per month after deducting all expenses? Simply put, if I calculate this investment in proportion to the trade in the Forex market, then you can easily get a monthly profit of 20k to 30k dollars from this completely non-existent internationally recognized business. This account is my on-average average, you can make a profit in exchange for skills and much more unlimited money. For which you do not need any special business position. There are no stops or business utilities. Your PC and internet connection is the main set up of your business. So sitting at home this business can change your destiny much easier and in less time.     How can you do this business at home? - You can trade at your own convenience. - The Forex market is open 24 hours a day, Monday to Friday, so you are not obliged to run the scheduled time scale like any other job, you can sit and trade at midnight if you want. - Forex is the largest market in the world with a daily turnover of ৪ 4 trillion, so everyone has the potential to be involved in this market. - Starting with a minimum capital of $ 1 and a maximum capital, you can start your own business with a small investment. - Representation of a single person cannot create any form of reflection in this market. Bill Gates himself could not afford to change this market. - You can trade both up and downtrends. - This is a spot trading market so you can buy instantly, you don't have to wait for any maturity. - Your transactions are completely secure through your own account password where no one has access. - Brokers can transact through various types of money media as per their choice. - Due to the loan facility, you can continue trading in more power than your own capital. - You can create a free and pre-investment method called Demo Account before you go to the main investment. - If you want to go out for any work, you have the facility to control the trade completely through your mobile phone. - Full-time or part-time bases can scale your choice. - Graduate-non-graduate is crazy for everyone i.e. educational qualification is weak.   All of the above benefits that you can get sitting at home without any business. The key to any business is to first master that business, to learn it well. So before you go to the main investment, of course, of course, the whole thing is clear and efficient then start. This time let's not know what kind of limitations you will have in this business or what kind of risks you may have. Be aware of the following issues before starting a business.   When investing, give priority to emotions over logic. - Going into business with your full capital i.e. Living Secure Money. - Going into business without acquiring full knowledge. - The whole concept of business practices is manipulated. - Make a profit from every trade. - Taking more risk than your own skills.   Forex trading is at the top of the world as a domestic profession for various exceptional religious benefits, especially for women who do not want to go out for work or engage in business, Forex may be their first choice to earn from home. And you can be a big earner in your family, you can change your destiny, you can be financially self-sufficient.

Trader's looking to enter the market are often sent off on a journey to discover the 'holy grail' of market entries. They study numerous theories; Japanese candlestick reversals, contrarian theory, oscillator divergence, wave theory, and others. Traders who are just starting out, put their trust in indicators and oscillators and rely on them make the decisions on when to place an order - and the more indicators/oscillators they discover, the more they add into their strategy.The most neglected indicator/oscillator is price. That's right, price! Price is superior to any indicator and all others come second. It's the only indicator that encompasses everything - economic factors, political and geographical. Novice traders often do not understand the importance of price and most of the time, they don't give it the attention it deserves.The most effective market entry is trend reversal. After an ongoing trend towards one direction, the market eventually signals the end of that trend and begins a new one towards the opposite direction. In this article, we'll be focussing on a few of the most popular reversal patterns: head & shoulders, double top and triple top.Head & ShouldersHead & Shoulders have a reputation for being one of the most dependable reversal patterns. It's a pattern based on price movement and indicates the start of a new trend in one direction, after an ongoing trend in the other direction ends.   How to spot Head & Shoulders:1. To have a reversal, an existing trend needs to exist, and head & shoulders is no different.2. A prevailing uptrend (in this case) is made up of consequent higher tops and bottoms.3. If volume is available, it signals alerts.4. An upwards move to the Head often illustrates decreased volume (if available) and signals a warning.5. The right Shoulder is lower than the Head and indicates a potential reversal.6. A significant close below the neckline (with increased volume, if available) indicates the end of the uptrend and the start of a downtrend.7. To calculate the minimum price target, project the height of the pattern to the neckline's breakout point.   Triple TopsSimilar to the Head & Shoulders, the Triple Top is made up of three (almost) equal tops and a significant close below the support (bottom) of the formation. It's important to have a break below the bottom in order to have a valid Triple Tops. The three tops on their own are not enough!   How to spot Triple Tops:1. An existing trend (in this case an uptrend) is vital before you go looking for a reversal.2. As with Head & Shoulders, the existing trend is marked by its consecutive higher tops and bottoms.3. If volume is available, it signals alerts.4. The upwards move to the resistance area indicates decreased volume (if available) and signals weakness to move higher.5. Equal (or almost equal) tops make up the resistance area.6. A significant close below the bottom (with increased volume, if available) indicates the end of the uptrend and the start of a downtrend.7. To calculate the minimum price target, project the height of the pattern to the breakout point.   Double TopsDuring an uptrend, a top might surpass a previous top if the demand exceeds the supply. When that trend runs out of gas, it will start showing signs (signals) of weakness. If volume is available, then a decrease in it will be the first signal as it moves upwards. Another signal is if the last top fails to go higher than the previous one. A reversal is confirmed if prices break below the bottom/support area.   How to spot Double Tops:1. An existing trend (in this case uptrend) is necessary.2. The existing uptrend is defined by consecutive higher tops and bottoms.3. If volume is available, it signals alerts.4. The upwards move to the resistance area indicates decreased volume (if available) and signals weakness to move higher.5. The tops are equal (or almost).6. A significant close below the bottom (with increased volume, if available) indicates the end of the uptrend and the start of a downtrend.7.To calculate the minimum price target, project the height of the pattern to the breakout point.   Price rules supreme over oscillators and indicators. Price discounts for everything that affects the markets and reveals the crowd's (traders) psychology. There are many bearish or bullish trend reversal patterns, and traders should pay more attention to them rather than experimenting solely with candlestick reversals and oscillator signals. Available volume in combination with oscillator analysis, can confirm reversal patterns with higher potential accuracy.

Post your comment