Using Lagging Or Leading explained by professional Forex trading experts the “Using Lagging Or Leading” FX trading team.
Using Lagging Or Leading?
When a new trader decides to incorporate charting into their trading, they often don’t know where to start. Most often, a quick search of how to find opportunities on the charts will lead you to the more popular indicators like a moving average, relative strength index or RSI, the moving average convergence divergence or MACD, or a Stochastic type indicator that shows you how markets oscillate up and down. The common thread of these types indicators is that they use a recent close of past price candles to hopefully anticipate immediate action to follow.
There is nothing wrong with looking at the last several periods in the market to determine aspects like whether the markets are trending or ranging. That is the often the best method to get the context for what is most likely the current state of the market. However, entering trades may be better done through price reacting to a leading indicator.
There are a handful of leading indicators that could not be given their due justice here. However, it’s important to know of the popular ones so that you can find one that works well with your current form of analysis. The basic function of a leading indicator is to help you see how price could unfold.
Pivot points are a personal favorite because they are the most objective of leading indicators. Pivot points are taken from critical past price points and then a calculation is plotted on the chart to give you three key levels. The pivot point sits in the middle of the calculations with resistance points or profit targets for buy trades above the pivot point and support or profit targets on sell trades. Therefore, if you believe EURUSD is likely to move higher you could target the green resistance levels and put a stop below the lower support level that matches your risk management rules.
Elliott Wave is a theory about the market in how trends and corrections unfold. The main arguments are that a trend subdivides into 5 waves with each wave displaying distinct characteristics. The leading nature of Elliott Wave comes in its use of Fibonacci ratios. If you’re unfamiliar with how to trade Fibonacci relationships, you can register for this FREE online course HERE. One common ratio that is used to define a profit target is that wave 5 often travels 61.8% of the distance covered in waves 1-3.
Using Lagging Or Leading Conclusion
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