What is ‘Forex Lagging Indicator’?

You must have heard the term lagging or lagging indicators. To explain this, there are two perspectives that can be seen that is fundamental and technical. Lagging indicators are measurable economic factors that only change due to economic conditions that begin to follow a certain pattern or trend. This lagging indicator is often associated with technical indicators that follow the price action of a pair. Often traders use it to generate transaction signals or as confirmation of movement and strength of emerging trends. Since this indicator is lagging (late) from the pair price, significant movement in the forex market generally occurs before the indicator can give a signal or confirmation.

From a fundamental perspective, the lagging indicator shows a clear financial signal after a significant economic shift. Therefore, lagging indicators confirm long-term trends, but not to predict them.

Some common examples of lagging indicators include unemployment rates, corporate profits and labor costs per unit of output. Interest rates are also a good lagging indicator, as interest rates will change as a reaction to market movements or economic conditions change as well. Other lagging indicators are economic measures, such as gross domestic product (GDP), consumer price index (CPI) and trade balance. This indicator is different from the main indicators, such as retail and stock market sales, used to forecast and make predictions.

Example of Lagging Technical Indicator

Indicator of lagging from technical perspective one of them is MA Crossover (Moving Average Crossing). MA technical indicators are formed after certain price movements have occurred. Some technical traders use the MA Cross by placing short-term MA and long-term MA. If there is a crossing between short term MA and long term MA both crossed up (goldencross) or down (deadcross) then it will be a confirmation when placing trading position buy or sell. This cross is considered to indicate an increase in momentum. But the method of lagging MA Cross indicator has a weakness that significant price movement may have occurred, so the position is considered lagging or too late.