It is important that you understand an indicator, what it measures, how it is calculated, and how it reacts to price changes, before you use it. Different types of indicators can often contradict each other as some are better suited to trending markets while others are better suited to non-trending or ranging markets. Other types of indicators can be trend indicators, momentum indicators, volatility indicators, market strength indicators and cycle indicators. In addition, depending on how they are calculated, indicators can oscillate above and below a zero line. Indicators also measure different aspects of the market action regardless of whether they are lagging and leading indicators. published New Concepts in Technical Trading Systems. Barrons (July 1984) noted: In 1978, the basis of mathematical analysis was expanded when J.
the premier technical trader publishing his work today. Leading indicators are usually considered better than lagging indicators as they probable direction before they occur however, their predictive nature does not necessarily increase their accuracy or validity. Welles Wilder was described in 1980 by Forbes Magazine as. These indicators turn only after the price action has already turned and therefore lag price action. Lagging Indicators, which follow the price movement, are usually trend-following indicators, such as the moving averages (MA) and Moving Average Convergence/Divergence (MACD).Some of the popular leading indicators include the Commodity Channel Index (CCI), the Relative Strength Index (RSI), the Stochastic Oscillator and the Williams' %R. Most leading indicators measure price momentum over a fixed look-back period. In other words, they indicate the probability of a trend reversal in advance. Leading Indicators are indicators that lead price movement.There are quite a number of different types of indicators but they all fall into two categories: Indicators are the cornerstones of technical analysis and play an important role in giving and confirming entry and exit signals in stock trading systems.