Leading and Lagging Currency Trading Indicators

Lagging Indicators in Currency Trading

This article looks at the indicators that you can use when currency trading.

When you trade on the forex market you need to know about the indicators that you can use.  There are two types of indicators that you can apply to your forex charts.  These are the leading and lagging indicators.  To correctly complete currency trading you will need to know about both of these indicator types and what they have to offer you.  If you do not use the correct indicators then you could end up trading incorrectly and this will lead to losses on the forex market.

The Leading Indicators

The first point you should look at is the leading indicators.  The leading indicator will create movement that precedes the price action movement.  This means that the indicator will tell you about what is going to happen before it happens.  There are many leading indicators that you can use when you trade, but some will be more common than others.

Two of the leading indicators that are used for currency trading are the RSI or relative strength levels and the stochastic oscillator.  These two indicators are commonly found with most charting software.  If you are going to be using them then you need to know how to do this correctly.  The leading indicator can be a great help to currency trading, but it can also bring large losses when not used correctly.

The Lagging Indicators

The lagging indicator does not have the same predictive properties that the leading indicator does.  These indicators will look at what has happened on the market and will tell you about this slightly after the price action occurs.  This means that you are going to be seeing the movement on the indicator after it has happening on the market.

There are a number of commonly used lagging indicators that you should look at.  The most common are the moving averages and the Bollinger Bands.  These indicators are found with most charting software and are considered to be among the most commonly used of all technical indicators.

The Use of Indicators with Currency Trading

Knowing about the indicators will not help you if you do not know how to use them.  It is recommended that you not use only leading or only lagging indicators.  To get the best idea of the market you need to consider using a combination of both indicator types.

When you use the combination of leading and lagging indicators you need to consider what the indicators are looking at.  The indicators need to be looking at different aspects of the market.  If you use more than one indicator to look at one aspect of the market then you are not going to be getting the best view.  In fact, you could be limiting the analysis that you are able to complete on the market.

The indicators that you us should be in line with the trading strategy that you are using.  The trading strategy will often tell you which indicators you should use and which you should not.  The strategy will also tell you about the signals that you are going to be getting from the different indicators.

 

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