Do Indicators lag?

Discussion in 'Trading' started by Daal, Oct 19, 2002.

  1. Daal


    Can someone give me a explanation of why they lag and why they are not too confiable?
  2. indicators lag because they are a derivitive of the price.since the price has to happen before the indicator can be calculated they have to lag the price.
  3. Exactly ...
  4. Daal


    But how about OBV or money follow?
  5. They are still based on historical information ...
  6. of course they do. if you take an indicator signal, you are basically fading present action, aren't you?
  7. bone

    bone ET Sponsor

    Yep. No Holy Grail. The big secret is that there is no secret. If you trade correctly, you don't need to necessarily know where the market is going.
  8. Indicators lag... that is why they are called indicators, not predictors. Technical indicators indicate what has been happening not what is about to happen! This is also why using technical analysis is as much art as science. Technical analysis is a game of historical probabilities not guaranteed outcomes.

    If a technical predictor that has a 100% accuracy or even pretty close is discovered, and then widely disseminated the game of trading is over! Any type of profit from short-term speculation would be wiped out because the markets would be too perfect and too efficient.

    Imagine if you had large amounts of capital and had a predictor (indicator with no lag) with near 100% accuracy. It's not speculation anymore, it's simply payment for liquidity.

    Just my .02 worth.

    A little analogy I use to think about relying too much on indicators to trade;
    I like my charts and indicators but trying to trade exclusively by using indicators that lag is like trying to drive on the highway using your rear view mirror. In the grand scheme of things it's important but if it's your only source of vision it's dangerous and eventually you'll end up dead!

  9. Not all of them lag. But you should use a couple of indicators at the same time. Not only one.
  10. what indicator doesnt lag?
    #10     Oct 19, 2002