We can compare indicators with price action and say indicators react to the price action, and therefore are secondary because they are followers of price. But wait and listen to this argument. The price moves up or down or stays flat (in a range). The indicators reflect the movement of price as the price bar is completed or as the price bar is being completed.One price bar can go up and next one go down, indicator reflects it in the manner it is designed for to show the movement of price.So if we conclude that indicators do reflect in some manner the movement of price, what you see in an indicator is interpretation of the price movement. Indicator is a help to read price movement without having a real good knowledge of price action.The question is which indicators take into account the prior price movement to reflect the probabilities of future movement more than others.The leading indicators show past supply and demand patterns to predict future price movement in similar manner as price bars do.No difference. Leading indicators in my opinion are as follows: 1: indicators that are built around volume show importance of supply and demand.
2:CCI reflecting future movement based on previous price action.
3:MACD showing past and future trends.
4:Indicators built around ADX and DM.
5:Moving Averages to determine trends (It is a lagging indicator but helps to be on the right side of the market) Thanks
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It's not a question of which indicators "lead" or "predict." Different traders respond to different indicators in different manners. For example you clearly respond well to CCI, MACD, ADX and Moving Averages. It has nothing to do with those indicators be "better" but rather you are better at interpreting those indicators as opposed to others. Many traders have found an ability to interpret RSI, Stochastics or one of the many other indicators out there.
I think you are making a great point Masood but I think you're presentation of the idea is confusing predictive qualities with predicitive interpretation.
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RSI like MA also helps to see general mood of the market, choose 5 or 6 period and watch whether it below or above its 50 % line.
But, as it was discussed, many times before when one working with indicators should be extremely careful in order "not get "fooled" by indicators"
ADX is nice indi, but many, for example, think that as higher it is as stronger trend is, correct but with remark, that when ADX "reaches" some "high" levels it tells not about market continuing strength, but about possible trend reversal.
If anybody will remind me I will trying to find great article I've read about it wrote, seems, by one friend of Richie brothers.
If you're smart then all indicators are leading, if you're not so smart all indicators are lagging.
In other words if you look in back testing to what happened to the price after some measure of the indicator then its leading. If you look at the indicator just to see what the price is doing (if it goes up or down) so maybe you are candle blind.
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I forgot to mention one thing, if some how there are certain class of filters,, called zero phase filtering, but they are not meant for stock market , despite how hard you try to let them remember their states.
for all the research so far is unable to go into future and look back and let you know in your time frame..
All indicators are leading! Leading in the way every trader wants to interpret their current position.
Like if a fast MA crosses a slow MA then the price goes more frequently in one direction. RSI above 60, and so on.
Otherwise why do you need them? To draw nice lines on a chart?
No. The indicators are derivatives of price action and sometimes volume.
You look at them to see a flow in the market and to see patterns in it. Exactly like in bars patterns.
The question is how good they predict the future price action. Thats another matter.
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I've yet to meet anybody who has been successful using price based indicators. Many traders seem to forget they are trading in a"market place" which is is a place for buyers and sellers to do business. The key in my opinion is being able to accurately identifying changes in control between those buyers and sellers. Price based indicators are worthless in this regard. Most retail traders use them which is why most lose money. If traders are still using MACD crossovers and the like to make trading decisions then the chances of success are slim to none. It's like taking a baseball bat to a golf game. Wrong tool for the job. Mere volume bars are also worthless.
Here is an approach in this post that shows a more holistic view how to look at the market. Forget price, think about your competition and what they are doing. Which buyers or sellers are late in the move and are likely to get out first? Are they capitulating? Is there commercial activity? How aggressive is it? Price is merely a derivative of the actions of buyers and sellers so that's what needs to be measured.