Wait! Wetin Indicators be?
Before we pieces Leading and Lagging indicators, make we first understand wetin indicators be and how dem dey take affect our trading success.
What are Trading Indicators?
Trading indicators na mathematical calculations way dey appear as lines, bars, dots or even arrows for di price chart to help traders identify some kind signs and trend.
So indicators na for new traders way never too sabi?
No! E just be like traffic signs way dey tell you how di road be, and dis signs go help di driver make informed decisions so dat imself and im passengers go reach their destination.
Indicators no dey control di market or price dem dey only serve as extra confirmation say di move way you want make na betta one.
You mean say indicators go show me wetin di market want do next abi?
Indicators go show you signs but no be dem dey control di market, dem dey only use di calculation of wetin price don do before take represent wetin fit happen next.
We get plenti technical indicators, and some of dem dey available on di exchange way you dey trade with and other ogbonge crytpo trading analysis tools.
All diz indicators dey inside two groups; Leading and Lagging indicators.
Leading and Lagging Indicators in Crypto Trading
Many traders no even know if dem dey use leading or lagging indicators.
To open a position too early dey as bad as joining a trend late, so make we see how balance leading and lagging indicators so dat you no go dey open positions to early or too late.
Make we take them one by one.
Leading Indicators
Leading indicators na indicators way dey try to predict possible market movement and trend reversals. Dem dey give early signal make di traders get quick entry advantage.
Imagine knowing say Bitcoin go pump thirty minutes before time! Na wetin leading indicators dey offer.
Thank you, make i go use leading indicators become millionaire!
Not so fast, because just as im get some advantages, disadvantages still dey and we go look dem one after di other.
Advantages of Leading Indicators
From im definition, e dey show you di next trend before e start, meaning say you go also know when a trend don dey end with di help of diz indicators.
Dem dey help you make di best decision of when to leave di market before you donate all your profit back to di exchange.
Na who enter on time dey get small stop loss, so e dey also help your risk management.
Disadvantages of leading indicators
Di fact say di signals dey come early no mean say e dey always correct.
Diz indicators dey give “Fake-out” most of di time, dat is, when a selling market run like e want change trend to start buying but come still continue to sell.
Another name for Leading Indicators na Oscillators.
An Oscillator na object or data way dey move up and down between two points. Dat is, di data only dey valid or measured when e hit either point x or point y.
Yes, Relative strength index [RSI], and Stochastics na popular leading indicators.
you go notice say RSI get di 30 mark for down way dey indicate say market dey over sold and traders suppose dey look out for a buy and when price break commit from di 70 mark way dey up, buyers don over buy and di sellers go dey gym to enter di market.
To balance leading and lagging indicators we need to see leading indicators in action. so, name your top two Oscillators make we test am.
Thank you for di suggestion, so we go use Relative Strenght Index and Stochastics
Lagging Indicators
Lagging indicators dey alert you when a new trend don start make you for no miss out.
Unlike leading indicators way dey make noise before a new trend start, dis ones dey wait to tell you “Hey, you still dey buy!
Advantages of lagging indicators
Di false signals no plenti, yes! Dey no dey quick to react.
Dem dey serve as good confirmation when you add am with some other technical tools.
Disadvantages of lagging indicators
Na everytin dey get bad side?
Di only draw back here na di fact say e slow, you go only know say di trend don start when e fit don go far.
Late entries sometimes dey increase risk because stop loss go large.
Another name for dis indicators na trend following or momentum indicators.
Dem dey show say a new trend don start and e dey hard to show false signals like leading indicators.
Di common examples na MACD, moving average, and Bollinger Bands.
You get di point now?
Both leading and lagging indicators dey unique in their own ways and you go notice how Moving Average Convergence Divergence [MACD] bin wait for eight hours before em remember say I’m suppose inform us to buy, making us to miss out on early profit and di Moving average still wait extra twelve hours to point us in di right direction.
Striking di Balance between leading and lagging indicators
Now, make we enter di fun part of how to balance leading and lagging indicators.
Every indicator get a unique way of calculating and presenting signals and i no go like to bore you with dat story.
How i want take use dis tori create positive results?
- As we don expose di strengths and weaknesses of dis indicators, observe and use dem on different time frames to know di one way dey work well with your type of trading and no use pass three or four indicators. So, if two out of three signals a buy, e mean say higher chances dey say you make betta decision.
- Combine your favorite leading and lagging indicators when you need extra confirmations. Especially when you no sure of when to enter or leave a position.
- Use leading indicators to observe possible trend change and lagging indicators to confirm say you dey right.
- Adjusting di settings of dis indicators dey help you get di best out of leading and lagging indicators.
- Di combination go help reduce risk and whenever leading and lagging indicators dey give conflicting signals, just leave di trade and come back another time.
Many failures na due to rush rush, di best tin to do when your indicators dey give different signals na to let go and try another asset or time.
Conclusion
To unlock success around trading with leading and lagging indicators go first start with a clear understanding of leading and lagging indicators so you go sabi di one to use and why. Every information for dis blog post no go help you if you no practice, and discover how to set your indicators to your taste.
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DISCLAIMER: Cryptocurrency dey very volatile and e dey hard to predict am, and all di information for dis blog no be financial advice so make sure you and your financial advisor get betta discussion before you make any form of investment.