Momentum Indicators And Oscillators

There are indicators that may actually work for you, yet there are indicators that might not be as effective. The following factors will determine whether such indicators work for your trading plan.

1. Leading vs. Lagging Indicators

Generally, there are two kinds of indicators: the lagging and the leading.

The lagging indicator will give traders a signal after a trend has been started and this will inform traders that they must pay attention.

The leading indicator will give traders a signal to buy before a new trend or a new reversal comes.

With the statement above you might think that leading indicators will be the one that can make you rich, well not necessarily. The leading indicator is not always right that is why you still need to have the lagging indicator.

On the other hand, you cannot use the lagging indicator alone since you will be too late for the trade since it will signal you after the trend.

The fact is, both can be supportive of one another and both can help you after you have thoroughly understood the pitfalls of each indicator.

2. Leading Indicators / Oscillators

Oscillators are data that moves to and fro between points. The Oscillators kinds of indicators are: Stochastics, RSI or Relative Strength Index and the Parabolic SAR.

Oscillators' nature is to assume a particular chart pattern with the results that is in the same reversal. They can determine to which point the trend will end.

If you notice that there is something wrong, the bad news is that there is no way of going back.

3. Lagging Indicators / Momentum

Spotting a trend is identified as moving averages of the MACD. This type of indicator will help traders spot the trends after they are established.

The good news, there is a very small chance that this is wrong. This is the trend following indicators.

Generally speaking, you might be confused now with what kind of indicator are you going to use. Will you use the oscillators or the trend following indicators?

The answer is simple; the first thing that you need to know is the type of market you are trading in. After identifying your market then you can now know which indicator will give you correct and accurate signals.

There are traders that are sure that they can't have the best of both worlds. The selection lies in your hands all you have to do is pick one. You do not have to hurry; you need to educate yourself with both kinds of indicators. Study each one and feel which one will support your trading plan.