Leading and Lagging Indicators

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Technical Analysis indicators can generally be divided up into one of two indicator types.

Leading

A Leading Indicator is an indicator designed to precede future price movements. They can get you into a profitable trade earlier than Lagging Indicators, however they are less reliable and can often lead to false signals. Two examples of popular Leading Indicators are the RSI and Stochastic oscillators.

Lagging

Lagging Indicators follow price movements. They are at their strongest during a well-defined trend. While somewhat more reliable than Leading Indicators, Lagging Indicators have the tendency to present signals much later and may lead to less profitability in certain cases. Popular Lagging Indicators are Bollinger Bands and Moving Averages.